Registration No. 33-
811-07149
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
Form N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X
Pre-Effective Amendment No.
Post-Effective Amendment No.
REGISTRATION STATEMENT UNDER THE INVESTMENT
COMPANY ACT OF 1940 X
Amendment No.
SMITH BARNEY SHEARSON OREGON MUNICIPALS FUND
(Exact name of Registrant as Specified in Charter)
Two World Trade Center, New York, New York 10048
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code
(212)720-9218
Francis J. McNamara, III, Esq.
Secretary
Smith Barney Shearson Oregon Municipals Fund
One Exchange Place
Boston, Massachusetts 02109
(Name and Address of Agent for Service)
Approximate Date of Proposed Public Offering:
As soon as possible after this Post-Effective Amendment
becomes effective
It is proposed that this filing will become effective:
_____ immediately upon filing pursuant to Rule 485(b)
on pursuant to Rule 485(b)
_____ 60 days after filing pursuant to Rule 485(a)
X on May 15, 1994 pursuant to Rule 485(a)
________________________________________________________________________CALCU
LATION OF REGISTRATION FEE UNDER THE SECURITIES ACT OF 1933
Title of Securities Amount Proposed Proposed amount of
Being Registered: Being Maximum Maximum
of Registra-
Registered: Offering Price
Aggregate tion Fee:
Per Share:
Offering Price:
_____________________________________________________________________
__
Beneficial
Interest, $.001
par value
per share Indefinite* *
Indefinite* $500
___________
* An indefinite number of shares of beneficial interest of the
Registrant is being registered by this Registration Statement
pursuant to Rule 24f-2 under the Investment Company Act of 1940.
________________________
The Registrant amends this Registration Statement on such date
or dates as may be necessary to delay its effective date until the
Registrant files a further amendment that specifically states that
this Registration Statement will thereafter become effective in
accordance with Section 8(a) of the Securities Act of 1933, as
amended, or until this Registration Statement becomes effective on
such date as the Commission, acting pursuant to Section 8(a) of the
Securities Act of 1933, as amended, may determine.
SMITH BARNEY SHEARSON OREGON MUNICIPALS FUND
FORM N-1A
CROSS REFERENCE SHEET
PURSUANT TO RULE 495(a)
Part A
Item No.
Prospectus Caption
1. Cover Page
Cover Page
2. Synopsis
Prospectus Summary
3. Financial Highlights
The Fund's Performance
4. General Description of
Registrant
Cover Page; Prospectus Summary;
Investment Objective and
Management Policies; Additional
Information
5. Management of the Fund
Management of the Fund;
Distributor
6. Capital Stock and Other
Securities
Investment Objective and
Management Policies; Dividends,
Distributions and Taxes;
Additional Information
7. Purchase of Securities Being
Offered
Purchase of Shares; Valuation of
Shares; Exchange Privilege
8 Redemption or Repurchase
Redemption of Shares; Exchange
Privilege
9. Pending Legal Proceedings
Not applicable
Part B
Item No.
Statement of
Additional Information Caption
10. Cover Page
Cover page
11. Table of Contents
Contents
12. General Information and
History
Additional Information
13. Investment Objectives and
Policies
Investment Objective and
Management Policies
14. Management of the Fund
Management of the Fund;
Distributor
15. Control Persons and Principal
Holders
of Securities
Management of the Fund
16. Investment Advisory and Other
Services
Management of the Fund;
17. Brokerage Allocation and
Other
Services
Investment Objective and
Management Policies
18. Capital Stock and Other
Securities
Investment Objective and
Management Policies; Redemption of
Shares; Taxes
19. Purchase, Redemption and
Pricing
of Securities Being
Offered
Purchase of Shares; Redemption of
Shares; Valuation of Shares;
Exchange Privilege; Distributor
20. Tax Status
Taxes
21. Underwriters
Purchase of Shares; Distributor
22. Calculation of Performance
Data
Performance Data
23. Financial Statements
Financial Statements
<PAGE>
MAY [15], 1994
SMITH BARNEY SHEARSON
OREGON
MUNICIPALS
FUND
PROSPECTUS BEGINS
ON PAGE ONE.
[LOGO]
<PAGE>
SMITH BARNEY SHEARSON
OREGON MUNICIPALS FUND
- ---------------------------------------------------------------------------
PROSPECTUS May [15], 1994
Two World Trade Center
New York, New York 10048
(212) 720-9218
Smith Barney Shearson Oregon Municipals Fund (the "Fund") is a non-
diversified
municipal fund that seeks to provide Oregon investors with as high a level of
dividend income exempt from Federal income tax and Oregon state personal
income
tax as is consistent with prudent investment management and the preservation
of
capital.
This Prospectus concisely sets forth certain information about the Fund,
including sales charges, distribution and service fees and expenses, which
prospective investors will find helpful in making an investment decision.
Investors are encouraged to read this Prospectus carefully and retain it for
future reference.
Additional information about the Fund is contained in a Statement of
Additional Information dated May [15], 1994, as amended or supplemented from
time to time, that is available upon request and without charge by calling or
writing the Fund at the telephone number or address set forth above or by
contacting your Smith Barney Shearson Financial Consultant. The Statement of
Additional Information has been filed with the Securities and Exchange
Commission (the "SEC") and is incorporated by reference into this Prospectus
in
its entirety.
SMITH BARNEY SHEARSON INC.
Distributor
GREENWICH STREET ADVISORS
Investment Adviser
MUTUAL MANAGEMENT CORP.
Administrator
THE BOSTON COMPANY ADVISORS, INC.
Sub-administrator
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A
CRIMINAL OFFENSE.
1
<PAGE>
SMITH BARNEY SHEARSON
OREGON MUNICIPALS FUND
- ---------------------------------------------------------------------------
TABLE OF CONTENTS
<TABLE>
<S> <C>
PROSPECTUS SUMMARY 3
----------------------------------------------------------------
VARIABLE PRICING SYSTEM 10
----------------------------------------------------------------
THE FUND'S PERFORMANCE 11
----------------------------------------------------------------
MANAGEMENT OF THE FUND 13
----------------------------------------------------------------
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES 14
----------------------------------------------------------------
OREGON MUNICIPAL SECURITIES 22
----------------------------------------------------------------
PURCHASE OF SHARES 24
----------------------------------------------------------------
REDEMPTION OF SHARES 27
----------------------------------------------------------------
VALUATION OF SHARES 31
----------------------------------------------------------------
EXCHANGE PRIVILEGE 32
----------------------------------------------------------------
DISTRIBUTOR 38
----------------------------------------------------------------
DIVIDENDS, DISTRIBUTIONS AND TAXES 39
----------------------------------------------------------------
ADDITIONAL INFORMATION 42
----------------------------------------------------------------
</TABLE>
2
<PAGE>
SMITH BARNEY SHEARSON
OREGON MUNICIPALS FUND
- ---------------------------------------------------------------------------
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY DETAILED INFORMATION
APPEARING ELSEWHERE IN THIS PROSPECTUS AND IN THE STATEMENT OF ADDITIONAL
INFORMATION. CROSS REFERENCES IN THIS SUMMARY ARE TO HEADINGS IN THE
PROSPECTUS.
SEE "TABLE OF CONTENTS."
BENEFITS TO INVESTORS THE FUND OFFERS INVESTORS SEVERAL IMPORTANT BENEFITS:
- - Dividends consisting primarily of income which is exempt from Federal
income
tax and Oregon state personal income tax.
- - A professionally managed portfolio comprised primarily of investment-grade
Oregon municipal securities.
- - Investment liquidity through convenient purchase and redemption procedures.
- - A convenient way to invest without the administrative and recordkeeping
burdens normally associated with the direct ownership of municipal
securities.
- - Different methods for purchasing shares that allow investment flexibility
and
a wider range of investment alternatives.
- - Automatic dividend reinvestment feature, plus exchange privilege within the
same class of shares of most other funds in the Smith Barney Shearson Group
of Funds.
INVESTMENT OBJECTIVE The Fund is an open-end, non-diversified, management
investment company that seeks to provide Oregon investors with as high a level
of dividend income exempt from Federal income taxes and Oregon state personal
income tax as is consistent with prudent investment management and the
preservation of capital. Its investments consist primarily of intermediate-
and
long-term investment-grade municipal securities issued by the State of Oregon,
local governments in the State of Oregon and certain other municipal issuers
such as the Commonwealth of Puerto Rico ("Oregon Municipal Securities") that
pay
interest which is excluded from gross income for Federal income tax purposes
and
exempt from Oregon state personal income taxes. Intermediate- and long-term
securities have remaining maturities at the time of purchase of between three
and twenty years. See "Investment Objective and Management Policies."
3
<PAGE>
SMITH BARNEY SHEARSON
OREGON MUNICIPALS FUND
- -------------------------------------------------------------
PROSPECTUS SUMMARY (CONTINUED)
VARIABLE PRICING SYSTEM The Fund offers two classes of shares ("Classes")
designed to provide investors with the flexibility of selecting an investment
best suited to their needs. These Classes, Class A shares and Class B shares,
differ principally in terms of the sales charges and rate of expenses to which
they are subject. See "Variable Pricing System."
CLASS A SHARES These shares are offered at net asset value per share plus a
maximum initial sales charge of 4.50%. The Fund pays an annual service fee of
.15% of the value of average daily net assets of this Class. See "Purchase of
Shares."
CLASS B SHARES These shares are offered at net asset value per share subject
to
a maximum contingent deferred sales charge ("CDSC") of 4.50% of redemption
proceeds, declining by .50% after the first year and by 1% each year
thereafter
to zero. The Fund pays an annual service fee of .15% and an annual
distribution
fee of .50% of the value of average daily net assets of this Class. See
"Purchase of Shares."
CLASS B CONVERSION FEATURE Class B shares will convert automatically to Class
A
shares, based on relative net asset value, eight years after the date of
original purchase. Upon conversion, these shares will no longer be subject to
an
annual distribution fee. The first of these conversions will commence on or
about September 30, 1994. See "Variable Pricing System -- Class B Shares."
PURCHASE OF SHARES Shares may be purchased through the Fund's distributor,
Smith
Barney Shearson Inc. ("Smith Barney Shearson"), or a broker that clears
securities transactions through Smith Barney Shearson on a fully disclosed
basis
(an "Introducing Broker"). Smith Barney Shearson recommends that single
investments of $250,000 or more should be made in Class A shares. See
"Purchase
of Shares."
INVESTMENT MINIMUMS Investors are subject to a minimum initial investment
requirement of $1,000 and a minimum subsequent investment requirement of $200.
See "Purchase of Shares."
SYSTEMATIC INVESTMENT PLAN The Fund offers shareholders a Systematic
Investment
Plan under which they may authorize the automatic placement of a purchase
order
each month or quarter for Fund shares in an amount not less than $100. See
"Purchase of Shares."
4
<PAGE>
SMITH BARNEY SHEARSON
OREGON MUNICIPALS FUND
- -------------------------------------------------------------
PROSPECTUS SUMMARY (CONTINUED)
REDEMPTION OF SHARES Shares may be redeemed on each day the New York Stock
Exchange, Inc. ("NYSE") is open for business. Class A shares are redeemable at
net asset value and Class B shares are redeemable at net asset value less any
applicable CDSC. See "Redemption of Shares."
MANAGEMENT OF THE FUND Greenwich Street Advisors, a division of Mutual
Management Corp., serves as the Fund's investment adviser. Mutual Management
Corp., which also serves as the Fund's administrator, provides investment
advisory and management services to investment companies affiliated with Smith
Barney Shearson. Smith Barney Shearson is a wholly owned subsidiary of Smith
Barney Shearson Holdings Inc., which is in turn a wholly owned subsidiary of
The
Travelers Inc. ("Travelers") (formerly Primerica Corporation), a diversified
financial services holding company principally engaged in the businesses of
providing investment, consumer finance and insurance services.
The Boston Company Advisors, Inc. ("Boston Advisors") serves as the Fund's
sub-administrator. Boston Advisors is a wholly owned subsidiary of The Boston
Company, Inc. ("TBC"), which in turn is a wholly owned subsidiary of Mellon
Bank
Corporation ("Mellon"). See "Management of the Fund."
EXCHANGE PRIVILEGE Shares of a Class may be exchanged for shares of the same
class of certain other funds in the Smith Barney Shearson Group of Funds and
certain money market funds. Certain exchanges may be subject to a sales charge
differential. See "Exchange Privilege."
VALUATION OF SHARES Net asset value of each Class is quoted daily in the
financial section of most newspapers and is also available from your Smith
Barney Shearson Financial Consultant. See "Valuation of Shares."
DIVIDENDS AND DISTRIBUTIONS Dividends from net investment income are declared
daily and paid on the last business day of the Smith Barney Shearson statement
month. Distributions of net realized long- and short-term capital gains, if
any,
are declared and paid annually after the end of the fiscal year in which they
were earned. See "Dividends, Distributions and Taxes."
REINVESTMENT OF DIVIDENDS Dividends and distributions paid on shares of a
Class
will be reinvested automatically unless otherwise specified by an
5
<PAGE>
SMITH BARNEY SHEARSON
OREGON MUNICIPALS FUND
- -------------------------------------------------------------
PROSPECTUS SUMMARY (CONTINUED)
investor in additional shares of the same Class at current net asset value.
Shares acquired by dividend and distribution reinvestments will not be subject
to any sales charge or CDSC. Class B shares acquired through dividend and
distribution reinvestments will become eligible for conversion to Class A
shares
on a pro-rata basis. See "Dividends, Distributions and Taxes" and "Variable
Pricing System."
RISK FACTORS AND SPECIAL CONSIDERATIONS There can be no assurance that the
Fund
will achieve its investment objective. Assets of the Fund also may be invested
in the municipal securities of non-Oregon municipal issuers. Dividends paid by
the Fund which are derived from interest attributable to Oregon Municipal
Securities will be excluded from gross income for Federal income tax purposes
and exempt from Oregon state personal income taxes (but not from Oregon state
franchise tax or Oregon state corporate income tax). Dividends derived from
interest on obligations of non-Oregon municipal issuers will be exempt from
Federal income taxes, but may be subject to Oregon state personal income
taxes.
Dividends derived from certain municipal securities (including Oregon
Municipal
Securities), however, may be a specific tax item for Federal alternative
minimum
tax purposes. The Fund may invest without limit in securities subject to the
Federal alternative minimum tax. See "Investment Objective and Management
Policies" and "Dividends, Distributions and Taxes."
The Fund is more susceptible to factors adversely affecting issuers of
Oregon
municipal securities than is a municipal bond fund that does not emphasize
these
issuers. See "Oregon Municipal Securities" in the Prospectus and "Special
Considerations Relating to Oregon Municipal Securities" in the Statement of
Additional Information for further details about the risks of investing in
Oregon obligations.
The Fund is classified as a non-diversified investment company under the
Investment Company Act of 1940, as amended (the "1940 Act"), which means that
the Fund is not limited by the 1940 Act in the proportion of its assets that
it
may invest in the obligations of a single issuer. The Fund's assumption of
large
positions in the obligations of a small number of issuers may cause the Fund's
share price to fluctuate to a greater extent than that of a diversified
company
as a result of changes in the financial condition or in the market's
assessment
of the issuers. See "Investment Objective and Management Policies."
6
<PAGE>
SMITH BARNEY SHEARSON
OREGON MUNICIPALS FUND
- -------------------------------------------------------------
PROSPECTUS SUMMARY (CONTINUED)
The Fund generally will invest at least 75% of its assets in securities
rated
investment grade, and may invest the remainder of its assets in securities
rated
as low as C by Moody's Investors Service, Inc. ("Moody's") or D by Standard &
Poor's Corporation ("S&P"). Securities in the fourth highest rating category,
though considered to be investment grade, have speculative characteristics.
Securities rated as low as D are extremely speculative and are in actual
default
of interest and/or principal payments. The Fund may also invest in unrated
securities determined to be of comparable quality to various rated securities
in accordance with the foregoing percentage limitation
There are several risks in connection with the use of certain portfolio
strategies by the Fund, such as the use of when-issued securities, municipal
bond index futures contracts and put and call options on interest rate futures
as hedging devices, municipal leases and securities lending. See "Investment
Objective and Management Policies -- Certain Portfolio Strategies."
THE FUND'S EXPENSES The following expense table lists the costs and expenses
an
investor will incur either directly or indirectly as a shareholder of the
Fund,
based on the maximum sales charge or maximum CDSC that may be incurred at the
time of purchase or redemption and the Fund's operating expenses:
<TABLE>
<CAPTION>
CLASS A CLASS B
<S> <C> <C>
-----------------------------------------------------------------------------
SHAREHOLDER TRANSACTION EXPENSES
Maximum sales charges imposed on purchases
(as a percentage of offering price) 4.50% --
Maximum CDSC (as a percentage of redemption
proceeds) -- 4.50%
-----------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Management fees 0.55 0.55
12b-1 fees* .15 .65
Other expenses**
-----------------------------------------------------------------------------
TOTAL FUND OPERATING EXPENSES % %
-----------------------------------------------------------------------------
<FN>
*Upon conversion, Class B shares will no longer be subject to a distribution
fee.
**Estimated expenses based upon Greenwich Street Advisors' management of
similar funds.
</TABLE>
7
<PAGE>
SMITH BARNEY SHEARSON
OREGON MUNICIPALS FUND
- -------------------------------------------------------------
PROSPECTUS SUMMARY (CONTINUED)
The sales charge and CDSC set forth in the above table are the maximum
charges
imposed on purchases or redemptions of Fund shares and investors may pay
actual
charges of less than 4.50% depending on the amount purchased and, in the case
of
Class B shares, the length of time the shares are held. See "Purchase of
Shares"
and "Redemption of Shares." Management fees paid by the Fund include
investment
advisory and administration fees paid to Mutual Management Corp. at the
following annual rates: .55% of the value of the Fund's average daily net
assets
[up to $500 million and .52% of the value of its average daily net assets in
excess of $500 million.] The nature of the services for which the Fund pays
management fees is described under "Management of the Fund." Smith Barney
Shearson receives an annual 12b-1 service fee of .15% of the value of average
daily net assets of Class A shares. Smith Barney Shearson also receives with
respect to Class B shares an annual 12b-1 fee of .65% of the value of average
daily net assets of Class B shares, consisting of a .50% distribution fee and
a
.15% service fee. "Other expenses" in the above table include fees for
shareholder services, custodial fees, legal and accounting fees, printing
costs
and registration fees.
EXAMPLE
The following example demonstrates the projected dollar amount of total
cumulative expenses that would be incurred over various periods with respect
to
a hypothetical $1,000 investment in the Fund assuming a 5% total return. THE
EXAMPLE ASSUMES PAYMENT BY THE FUND OF OPERATING EXPENSES AT THE LEVELS SET
FORTH IN THE ABOVE TABLE. THE EXAMPLE SHOULD NOT BE CONSIDERED A
REPRESENTATION
OF PAST OR FUTURE EXPENSES AND ACTUAL
8
<PAGE>
SMITH BARNEY SHEARSON
OREGON MUNICIPALS FUND
- -------------------------------------------------------------
PROSPECTUS SUMMARY (CONTINUED)
EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. MOREOVER, WHILE THE EXAMPLE
ASSUMES A 5% ANNUAL RETURN, THE FUND'S ACTUAL PERFORMANCE WILL VARY AND MAY
RESULT IN AN ACTUAL RETURN GREATER OR LESS THAN 5%.
<TABLE>
<CAPTION>
1 YEAR 3 YEARS
<S> <C> <C>
-------------------------------------------------------
Class A shares* $ $
Class B shares:
Assumes complete redemption at end
of each time period** $ $
Assumes no redemption $ $
-----------------------------------------------------------------------------
- ---
<FN>
*Assumes deduction at the time of purchase of the maximum 4.50% sales
charge.
**Assumes deduction at the time of redemption of the maximum CDSC applicable
for that time period.
</TABLE>
9
<PAGE>
SMITH BARNEY SHEARSON
OREGON MUNICIPALS FUND
- --------------------------------------------------------------------
VARIABLE PRICING SYSTEM
The Fund offers individual investors two methods of purchasing shares, thus
enabling investors to choose the Class that best suits their needs, given the
amount of purchase and intended length of investment.
CLASS A SHARES. Class A shares are sold at net asset value per share plus a
maximum initial sales charge of 4.50% imposed at the time of purchase. The
initial sales charge may be reduced or waived for certain purchases. Class A
shares are subject to an annual service fee of .15% of the value of the Fund's
average daily net assets attributable to Class A. The annual service fee is
used
by Smith Barney Shearson to compensate its Financial Consultants for ongoing
services provided to shareholders. The sales charge is used to compensate
Smith
Barney Shearson for expenses incurred in selling Class A shares. See "Purchase
of Shares."
CLASS B SHARES. Class B shares are sold at net asset value per share subject
to a maximum 4.50% CDSC, which is assessed only if the shareholder redeems
shares within the first five years of investment. This results in 100% of the
investor's assets being used to acquire shares of the Fund. After the first
year after the purchase of a share, the CDSC declines to 4.00%; for each year
of
investment thereafter within this five-year time frame, the applicable CDSC
declines by 1%; in year six, the applicable CDSC is reduced to 0%. See
"Purchase
of Shares" and "Redemption of Shares."
Class B shares are subject to an annual service fee of .15% and an annual
distribution fee of .50% of the value of the Fund's average daily net assets
attributable to the Class. Like the service fee applicable to Class A shares,
the Class B service fee is used to compensate Smith Barney Shearson Financial
Consultants for ongoing services provided to shareholders. Additionally, the
distribution fee paid with respect to Class B shares compensates Smith Barney
Shearson for expenses incurred in selling those shares, including expenses
such
as sales commissions, Smith Barney Shearson's branch office overhead expenses
and marketing costs associated with Class B shares, such as preparation of
sales
literature, advertising and printing and distributing prospectuses, statements
of additional information and other materials to prospective investors in
Class
B shares. A Financial Consultant may receive different levels of compensation
for selling different Classes.
10
<PAGE>
SMITH BARNEY SHEARSON
OREGON MUNICIPALS FUND
- -------------------------------------------------------------
VARIABLE PRICING SYSTEM (CONTINUED)
Class B shares are subject to a distribution fee and a higher transfer agency
fee than Class A shares which, in turn, will cause Class B shares to have a
higher expense ratio and pay lower dividends than Class A shares.
Eight years after the date of purchase, Class B shares will convert
automatically to Class A shares, based on the relative net asset values of
shares of each Class, and will no longer be subject to a distribution fee. In
addition, a certain portion of Class B shares that have been acquired through
the reinvestment of dividends and distributions ("Class B Dividend Shares")
will
be converted at that time. That portion will be a percentage of the total
number
of Class B Dividend Shares owned by the shareholder, equal to the ratio of the
total number of Class B shares converting at the time to the total number of
Class B shares (other than Class B Dividend Shares owned by the shareholder).
The conversion of Class B shares into Class A shares is subject to the
continuing availability of an opinion of counsel to the effect that such
conversions will not constitute taxable events for Federal tax purposes.
- --------------------------------------------------------------------
THE FUND'S PERFORMANCE
YIELD
From time to time, the Fund may advertise its 30-day "yield" and "equivalent
taxable yield" for each Class. The yield refers to the
income generated by an investment in those shares over the 30-day period
identified in the advertisement and is computed by dividing the net investment
income per share earned by the Class during the period by the maximum public
offering price per share on the last day of the period. This income is
"annualized" by assuming that the amount of income is generated each month
over
a one-year period and is compounded semi-annually. The annualized income is
then
shown as a percentage of the net asset value.
The Fund's equivalent taxable yield demonstrates the yield on a taxable
investment necessary to produce an after-tax yield equal to the Fund's tax-
exempt yield for each Class. It is calculated by increasing the yield
shown for the Class to the extent necessary to reflect the payment of taxes
11
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SMITH BARNEY SHEARSON
OREGON MUNICIPALS FUND
- -------------------------------------------------------------
THE FUND'S PERFORMANCE (CONTINUED)
at specified tax rates. Thus, the equivalent taxable yield always will exceed
the Fund's yield. For more information on equivalent taxable yields, refer to
the table under "Dividends, Distributions and Taxes."
TOTAL RETURN
From time to time, the Fund may advertise its "average annual total return"
over various periods of time for each Class. Such total return figures show
the
average percentage change in the value of an investment in the Class from the
beginning date of the measuring period to the end of the measuring period.
These
figures reflect changes in the price of the Fund's shares and assume that any
income dividends and/or capital gains distributions made by the Fund with
respect to that Class during the period were reinvested in shares of that
Class
of the Fund. Class A total return figures include the maximum initial 4.50%
sales charge and Class B total return figures include any applicable CDSC.
These
figures also take into account the service and distribution fees, if any,
payable with respect to the Classes.
Total return figures will be given for the recent one-, five-and ten-year
periods, or for the life of a Class to the extent it has not been in existence
for any such periods, and may be given for other periods as well, such as on a
year-by-year basis. When considering average annual total return figures for
periods longer than one year, it is important to note that the average annual
total return for any one year in the period might have been greater or less
than
the average for the entire period. "Aggregate total return" figures may be
used
for various periods, representing the cumulative change in the value of an
investment in a Class for the specific period (again reflecting changes in
share
prices and assuming reinvestment of dividends and distributions). Aggregate
total return may be calculated either with or without the effect of the
maximum
4.50% sales charge for the Class A shares or any applicable CDSC for Class B
shares and may be shown by means of schedules, charts or graphs, and may
indicate subtotals of the various components of total return (that is, changes
in the value of initial investment, income dividends and capital gains
distributions). Because of the differences in sales charges and distribution
fees, the performance for each of the Classes will differ.
In reports or other communications to shareholders or in advertising
material,
performance of the Classes may be compared with that of other
12
<PAGE>
SMITH BARNEY SHEARSON
OREGON MUNICIPALS FUND
- -------------------------------------------------------------
THE FUND'S PERFORMANCE (CONTINUED)
mutual funds or classes of shares of other funds as listed in the rankings
prepared by Lipper Analytical Services, Inc. or similar independent services
that monitor the performance of mutual funds, or other industry or financial
publications such as BARRON'S, BUSINESS WEEK, CDA INVESTMENT TECHNOLOGIES,
INC.,
FORBES, FORTUNE, INSTITUTIONAL INVESTOR, INVESTORS DAILY, KIPLINGER'S PERSONAL
FINANCE, MORNINGSTAR MUTUAL FUND VALUES, MONEY, THE WALL STREET JOURNAL, THE
NEW
YORK TIMES and USA TODAY. Performance figures are based on historical earnings
and are not intended to indicate future performance. To the extent that any
advertisement or sales literature of the Fund describes the expenses or
performance of a Class, it will also disclose such information for the other
Class. The Statement of Additional Information contains a description of the
methods used to determine performance. Performance figures may be obtained
from
your Smith Barney Shearson Financial Consultant.
- --------------------------------------------------------------------
MANAGEMENT OF THE FUND
BOARD OF TRUSTEES
Overall responsibility for management and supervision of the Fund rests with
the Fund's Board of Trustees. The Trustees approve all significant agreements
between the Fund and the companies that furnish services to the Fund,
including
agreements with its distributor, investment adviser, administrator,
sub-administrator, custodian and transfer agent. The day-to-day operations of
the Fund are delegated to the Fund's investment adviser, administrator and
sub-administrator. The Statement of Additional Information contains general
background information regarding each Trustee and executive officer of the
Fund.
INVESTMENT ADVISER--GREENWICH STREET ADVISORS
ADMINISTRATOR - MUTAUAL MANAGEMENT CORP.
Greenwich Street Advisors, located at Two World Trade Center, New York, New
York 10048, serves as the Fund's investment adviser. Greenwich Street Advisors
(through predecessor entities) has been in the investment counseling business
since 1934 and is a division of Mutual Management Corp., which was
incorporated
in 1978. The Greenwich Street Advisors division of Mutual Management Corp.
renders investment advice to
13
<PAGE>
SMITH BARNEY SHEARSON
OREGON MUNICIPALS FUND
- -------------------------------------------------------------
MANAGEMENT OF THE FUND (CONTINUED)
investment company clients which had aggregate assets under management as of
April 30, 1994, in excess of $ billion. Mutual Management Corp. as a whole
provides investment management and investment administration services to
investment companies which had aggregate assets as of April 30, 1994, in
excess
of $ .
Subject to the supervision and direction of the Fund's Board of Trustees,
Greenwich Street Advisors manages the Fund's portfolio in accordance with the
Fund's investment objective and policies, makes investment decisions for the
Fund, places orders to purchase and sell securities and employs professional
portfolio managers and securities analysts who provide research services to
the
Fund. Also, Mutual Management Corp. provides senior executive management for
the
Fund and generally oversees and directs all aspects of the Fund's
administration
and operation.
PORTFOLIO MANAGEMENT
[ ], [Managing Director] of Greenwich Street Advisors, serves
as
Vice President and Investment Officer of the Fund and manages the day-to-day
operations of the Fund including making all investment decisions. Mr. [
]
has been employed by Greenwich Street Advisors since [ , 19 ].
SUB-ADMINISTRATOR--BOSTON ADVISORS
Boston Advisors, located at One Boston Place, Boston, Massachusetts 02108,
serves as the Fund's sub-administrator. Boston Advisors provides investment
management and investment administrative services to investment companies that
had aggregate assets as of April 30, 1994, in excess of $ billion. Boston
Advisors, among other responsibilities, calculates the net asset value of the
Fund's shares and generally assists in all aspects of the Fund's
administration
and operation.
- --------------------------------------------------------------------
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES
The investment objective of the Fund is to provide Oregon investors with as
high a level of dividend income exempt from Federal income taxes and Oregon
state personal income tax as is consistent with prudent investment
14
<PAGE>
SMITH BARNEY SHEARSON
OREGON MUNICIPALS FUND
- -------------------------------------------------------------
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES (CONTINUED)
management and the preservation of capital. This investment objective may not
be
changed without the approval of the holders of a majority of the Fund's
outstanding shares. There can be no assurance that the Fund's investment
objective will be achieved.
The Fund will operate subject to an investment policy providing that, under
normal market conditions, the Fund will invest at least 80% of its net assets
in
Oregon Municipal Securities, which pay interest which is excluded from gross
income for Federal income tax purposes and which is exempt from Oregon state
personal income tax.
The Fund may invest up to 20% of its net assets in municipal securities of
non-Oregon municipal issuers, the interest on which is excluded from gross
income for Federal income tax purposes (not including the possible
applicability
of a Federal alternative minimum tax), but which is subject to Oregon state
personal income tax. When Greenwich Street Advisors believes that market
conditions warrant adoption of a temporary defensive investment posture, the
Fund may invest without limit in non-Oregon municipal issuers and in
"Temporary
Investments" as described below.
The Fund generally will invest at least 75% of its total assets in
investment
grade debt obligations rated no lower than Baa, MIG 3 or Prime-1 by Moody's or
BBB, SP-2 or A-1 by S&P, or in unrated obligations of comparable quality.
Unrated securities will be considered to be of investment grade if deemed by
Greenwich Street Advisors to be comparable in quality to instruments so rated,
or if other outstanding obligations of the issuers thereof are rated Baa or
better by Moody's or BBB or better by S&P. The balance of the Fund's assets
may
be invested in securities rated as low as C by Moody's or D by S&P, or
comparable unrated securities. Securities in the fourth highest rating
category,
though considered to be investment grade, have speculative characteristics.
Securities rated as low as D are extremely speculative and are in actual
default
of interest and/or principal payments.
The Fund's average weighted maturity will vary from time to time based on
the
judgment of Greenwich Street Advisors. The Fund intends to focus on
intermediate- and long-term obligations, that is, obligations with remaining
maturities at the time of purchase of between three and twenty years.
Obligations which are rated Baa by Moody's or BBB by S&P and those which are
rated lower than investment grade are subject to greater
15
<PAGE>
SMITH BARNEY SHEARSON
OREGON MUNICIPALS FUND
- -------------------------------------------------------------
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES (CONTINUED)
market fluctuation and more uncertainty as to payment of principal and
interest,
and therefore generate higher yields than obligations rated above Baa or BBB.
LOW AND COMPARABLE UNRATED SECURITIES. While the market values of low-rated
and comparable unrated securities tend to react less to fluctuations in
interest
rate levels than the market values of higher-rated securities, the market
values
of certain low-rated and comparable unrated municipal securities also tend to
be
more sensitive than higher-rated securities to short-term corporate and
industry
developments and changes in economic conditions (including recession) in
specific regions or localities or among specific types of issuers. In
addition,
low-rated securities and comparable unrated securities generally present a
higher degree of credit risk. During an economic downturn or a prolonged
period
of rising interest rates, the ability of issuers of low-rated and comparable
unrated securities to service their payment obligations, meet projected goals
or
obtain additional financing may be impaired. The risk of loss due to default
by
such issuers is significantly greater because low-rated and comparable unrated
securities generally are unsecured and frequently are subordinated to the
prior
payment of senior indebtedness. The Fund may incur additional expenses to the
extent it is required to seek recovery upon a default in payment of principal
or
interest on its portfolio holdings.
While the market for municipal securities is considered to be generally
adequate, the existence of limited markets for particular low-rated and
comparable unrated securities may diminish the Fund's ability to (a) obtain
accurate market quotations for purposes of valuing such securities and
calculating its net asset value and (b) sell the securities at fair value
either
to meet redemption requests or to respond to changes in the economy or in the
financial markets. The market for certain low-rated and comparable unrated
securities has not fully weathered a major economic
recession. Any such economic downturn could adversely affect the ability of
the issuers of such securities to repay principal and pay interest thereon.
Fixed-income securities, including low-rated securities and comparable
unrated
securities, frequently have call or buy-back features that permit their
issuers
to call or repurchase the securities from their holders, such as the Fund. If
an
issuer exercises these rights during the periods of declining
16
<PAGE>
SMITH BARNEY SHEARSON
OREGON MUNICIPALS FUND
- -------------------------------------------------------------
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES (CONTINUED)
interest rates, the Fund may have to replace the security with a lower
yielding
security, thus resulting in a decreased return to the Fund. A description of
the
rating systems of Moody's and S&P is contained in the Statement of Additional
Information.
MUNICIPAL LEASES. The Funds may invest in "Municipal leases," which
generally
are participations in intermediate- and short-term debt obligations issued by
municipalities consisting of leases or installment purchase contracts for
property or equipment. Although lease obligations do not constitute general
obligations of the municipality for which the municipality's taxing power is
pledged, a lease obligation is ordinarily backed by the municipality's
covenant
to budget for, appropriate and make the payments due under the lease
obligation.
However, certain lease obligations contain "non-appropriation" clauses which
provide that the municipality has no obligation to make lease or installment
purchase payments in future years unless money is appropriated for such
purpose
on a yearly basis. In addition to the "non-appropriation" risk, these
securities
represent a relatively new type of financing that has not yet developed the
depth of marketability associated with more conventional bonds. Although
"non-appropriation" lease obligations are often secured by the underlying
property, disposition of the property in the event of foreclosure might prove
difficult. There is no limitation on the percentage of the Fund's assets that
may be invested in municipal lease obligations. In evaluating municipal lease
obligations, Greenwich Street Advisors will consider such factors as it deems
appropriate, which may include: (a) whether the lease can be canceled; (b) the
ability of the lease obligee to direct the sale of the underlying assets; (c)
the general creditworthiness of the lease obligor; (d) the likelihood that the
municipality will discontinue appropriating funding for the leased property in
the event such property is no longer considered essential by the municipality;
(e) the legal recourse of the lease obligee in the event of such a failure to
appropriate funding; (f) whether the security is backed by a credit
enhancement
such as insurance; and (g) any limitations which are imposed on the lease
obligor's ability to utilize substitute property or services rather than those
covered by the lease obligation.
The Fund may invest without limit in private activity bonds. Interest income
on certain types of private activity bonds issued after August 7, 1986 to
finance non-governmental activities is a specific tax preference item for
purposes of the Federal individual and corporate alternative minimum taxes.
17
<PAGE>
SMITH BARNEY SHEARSON
OREGON MUNICIPALS FUND
- -------------------------------------------------------------
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES (CONTINUED)
Individual and corporate shareholders may be subject to a Federal alternative
minimum tax to the extent the Fund's dividends are derived from interest on
those bonds. Dividends derived from interest income on Oregon Municipal
Securities are a component of the "current earnings" adjustment item for
purposes of the Federal corporate alternative minimum tax.
The Fund is classified as a non-diversified investment company under the
1940
Act, which means that the Fund is not limited by the 1940 Act in the
proportion
of its assets that it may invest in the obligations of a single issuer. The
Fund
intends to conduct its operations, however, so as to qualify as a "regulated
investment company" for purposes of the Internal Revenue Code of 1986, as
amended (the "Code"), which will relieve the Fund of any liability for Federal
income tax and Oregon state franchise tax to the extent its earnings are
distributed to shareholders. To so qualify, among other requirements, the Fund
will limit its investments so that, at the close of each quarter of the
taxable
year, (a) not more than 25% of the market value of the Fund's total assets
will
be invested in the securities of a single issuer and (b) with respect to 50%
of
the market value of its total assets, not more than 5% of the market value of
its total assets will be invested in the securities of a single issuer and the
Fund will not own more than 10% of the outstanding voting securities of a
single
issuer. The Fund's assumption of large positions in the obligations of a small
number of issuers may cause the Fund's share price to fluctuate to a greater
extent than that of a diversified company as a result of changes in the
financial condition or in the market's assessment of the issuers.
The Fund may invest without limit in debt obligations that are repayable out
of revenue streams generated from economically-related projects or facilities.
Sizeable investments in such obligations could involve an increased risk to
the
Fund should any of the related projects or facilities experience financial
difficulties. In addition, the Fund also may invest up to an aggregate of 15%
of
its total assets in securities with contractual or other restrictions on
resale
and other instruments which are not readily marketable. Notwithstanding the
foregoing, the Fund shall not invest more than 10% of its assets in securities
that are restricted. The Fund also is authorized to borrow an amount of up to
10% of its total assets (including the amount borrowed) valued at market less
liabilities (not including the amount borrowed) in order to meet anticipated
redemptions and to pledge its assets to the same extent in connection with the
borrowings.
18
<PAGE>
SMITH BARNEY SHEARSON
OREGON MUNICIPALS FUND
- -------------------------------------------------------------
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES (CONTINUED)
Further information about the Fund's investment policies, including a list
of
those restrictions on the Fund's investment activities that cannot be changed
without shareholder approval, appears in the Statement of Additional
Information.
CERTAIN PORTFOLIO STRATEGIES
In attempting to achieve its investment objective, the Fund may employ,
among
others, the following portfolio strategies.
WHEN-ISSUED SECURITIES. New issues of Oregon Municipal Securities (and other
tax-exempt obligations) frequently are offered on a when-issued basis, which
means that delivery and payment for such securities normally take place within
15 to 45 days after the date of the commitment to purchase. The payment
obligation and the interest rate that will be received on when-issued
securities
are fixed at the time the buyer enters into the commitment. Oregon Municipal
Securities, like other investments made by the Fund, may decline or appreciate
in value before their actual delivery to the Fund. Due to fluctuations in the
value of securities purchased and sold on a when-issued basis, the yields
obtained on these securities may be higher or lower than the yields available
in
the market on the date when the investments actually are delivered to the
buyers. The Fund will not accrue income with respect to a when-issued security
prior to its stated delivery date. The Fund will establish a segregated
account
with the Fund's custodian consisting of cash, obligations issued or guaranteed
by the United States government or its agencies or instrumentalities ("U.S.
government securities") or other high grade debt obligations in an amount
equal
to the purchase price of the when-issued securities. Placing securities rather
than cash in the segregated account may have a leveraging effect on the Fund's
net assets. The Fund generally will make commitments to purchase Oregon
Municipal Securities (and other tax-exempt obligations) on a when-issued basis
only with the intention of actually acquiring the securities, but the Fund may
sell such securities before the delivery date if it is deemed advisable.
TEMPORARY INVESTMENTS. Under normal market conditions, the Fund may hold up
to
20% of its total assets in cash or money market instruments, including taxable
money market instruments ("Temporary Investments"). In addition, when
Greenwich
Street Advisors believes that market conditions warrant, including when
acceptable Oregon Municipal Securities are not
19
<PAGE>
SMITH BARNEY SHEARSON
OREGON MUNICIPALS FUND
- -------------------------------------------------------------
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES (CONTINUED)
available, the Fund may take a temporary defensive posture and invest without
limitation in Temporary Investments. Tax-exempt securities eligible for
short-term investment by the Fund are municipal notes having, at the time of
purchase, a rating within the three highest grades of Moody's or S&P or, if
not
rated, having an issue of outstanding debt securities rated within the three
highest grades of Moody's or S&P, and certain taxable short-term instruments
having quality characteristics comparable to those for tax-exempt investments.
To the extent the Fund holds Temporary Investments, it may not achieve its
investment objective. Since the commencement of its operations, the Fund has
not
found it necessary to make taxable Temporary Investments and it is not
expected
that such action will be necessary.
FINANCIAL FUTURES AND OPTIONS TRANSACTIONS. The Fund may enter into
financial
futures contracts and invest in options on financial futures contracts that
are
traded on a U.S. exchange or board of trade. Such investments, if any, by the
Fund will be made solely for the purpose of hedging against the changes in the
value of its portfolio securities due to anticipated changes in interest rates
and market conditions and where the transactions are economically appropriate
to
the reduction of risks inherent in the management of the Fund. The futures
contract or options on futures contracts that may be entered into by the Fund
will be restricted to those that are either based on a municipal bond index or
relate to debt securities the prices of which are anticipated by Greenwich
Street Advisors to correlate with the prices of the Oregon Municipal
Securities
owned or to be purchased by the Fund.
In entering into a financial futures contract, the Fund will be required to
deposit with the broker through which it undertakes the transaction an amount
of
cash or cash equivalents equal to approximately 5% of the contract amount.
This
amount, which is known as "initial margin," is subject to change by the
exchange
or board of trade on which the contract is traded, and members of the exchange
or board of trade may charge a higher amount. Initial margin is in the nature
of
a performance bond or good faith deposit on the contract that is returned to
the
Fund upon termination of the futures contract, assuming all contractual
obligations have been satisfied. In accordance with a process known as
"marking-to-market," subsequent payments known as "variation margin," to and
from the broker will be made daily as the price of the index or securities
underlying the
20
<PAGE>
SMITH BARNEY SHEARSON
OREGON MUNICIPALS FUND
- -------------------------------------------------------------
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES (CONTINUED)
futures contract fluctuates, making the long and short positions in the
futures
contract more or less valuable. At any time prior to the expiration of a
futures
contract, the Fund may elect to close the position by taking an opposite
position, which will operate to terminate the Fund's existing position in the
contract.
A financial futures contract provides for the future sale by one party and
the
purchase by the other party of a certain amount of a specified property at a
specified price, date, time and place. Unlike the direct investment in a
futures
contract, an option on a financial futures contract gives the purchaser the
right, in turn for the premium paid, to assume a position in the financial
futures contract at a specified exercise price at any time prior to the
expiration date of the option. Upon exercise of an option, the delivery of the
futures position by the writer of the option to the holder of the option will
be
accompanied by delivery of the accumulated balance in the writer's futures
margin account, which represents the amount by which the market price of the
futures contract exceeds, in the case of a call, or is less than, in the case
of
a put, the exercise price of the option on the futures contract. The potential
loss related to the purchase of an option on financial futures contracts is
limited to the premium paid for the option (plus transaction costs). The value
of the option may change daily and that change would be reflected in the net
asset value of the Fund.
Regulations of the Commodity Futures Trading Commission applicable to the
Fund
require that its transactions in financial futures contracts and options on
financial futures contracts be engaged in for bona fide hedging purposes or
other permitted purposes, and that no such transactions may be entered into by
the Fund if the aggregate initial margin deposits and premiums paid by the
Fund
for unexpired commodity options, other than bona fide hedging transactions,
would
exceed 5% of the market value of its assets. In addition, the Fund will, with
respect to its purchases of financial futures contracts, establish a
segregated
account consisting of cash or cash equivalents in an amount equal to the total
market value of the futures contracts, less the amount of initial margin on
deposit for the contracts. The Fund's ability to trade in financial futures
contracts and options on financial futures contracts may be limited to some
extent by the requirements of the applicable to a regulated investment
company that are described below under
"Dividends, Distributions and Taxes."
21
<PAGE>
SMITH BARNEY SHEARSON
OREGON MUNICIPALS FUND
- -------------------------------------------------------------
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES (CONTINUED)
LENDING OF PORTFOLIO SECURITIES. The Fund has the ability to lend securities
from its portfolio to brokers, dealers and other financial organizations. Such
loans, if and when made, may not exceed 20% of the Fund's total assets, taken
at
value. Loans of portfolio securities by the Fund will be collateralized by
cash,
letters of credit or U.S. government securities which are maintained at all
times in an amount equal to at least 100% of the current market value
(determined by marking to market daily) of the loaned securities. The risks in
lending portfolio securities, as with other extensions of secured credit,
consist of possible delays in receiving additional collateral or in the
recovery
of the securities or possible loss of rights in the collateral should the
borrower fail financially. Loans will be made to firms deemed by Greenwich
Street Advisors to be of good standing and will not be made unless, in the
judgment of Greenwich Street Advisors, the consideration to be earned from
such
loans would justify the risk.
- --------------------------------------------------------------------
OREGON MUNICIPAL SECURITIES
As used in this Prospectus, the term "Oregon Municipal Securities" generally
refers to intermediate-and long-term debt obligations issued by the State of
Oregon and local governments in the State of Oregon, together with certain
other
governmental issuers such as the Commonwealth of Puerto Rico, to obtain funds
for various public purposes. The interest on such obligations is, in the
opinion
of bond counsel to the issuers, excluded from gross income for Federal income
tax purposes and exempt from Oregon state personal income tax, and for that
reason generally is fixed at a lower rate than it would be if it were subject
to
such taxes. Interest income on certain municipal securities (including Oregon
Municipal Securities) is a specific tax preference item for purposes of the
Federal individual and corporate alternative minimum taxes.
CLASSIFICATIONS
The two principal classifications of Oregon Municipal Securities are
"general
obligation bonds" and "revenue bonds." General obligation bonds are secured by
the issuer's pledge of its full faith, credit and taxing power for the payment
of principal and interest. Revenue bonds are payable from the revenues derived
from a particular facility or class of facilities or, in
22
<PAGE>
SMITH BARNEY SHEARSON
OREGON MUNICIPALS FUND
- ---------------------------------------------------------------------------
OREGON MUNICIPAL SECURITIES (CONTINUED)
some cases, from the proceeds of a special excise tax or other specific
revenue
source, but not from the general taxing power. Sizeable investments in such
obligations could involve an increased risk to the Fund should any of such
related facilities experience financial difficulties. In addition, certain
types
of private activity bonds issued by or on behalf of public authorities to
obtain
funds for privately operated facilities are included in the term Oregon
Municipal Securities, provided the interest paid thereon qualifies as excluded
from gross income for Federal income tax purposes and as exempt from Oregon
state personal income tax. Private activity bonds generally do not carry the
pledge of the credit of the issuing municipality.
SPECIAL CONSIDERATIONS
The Fund ordinarily will invest at least 65% of its total assets in Oregon
Municipal Securities, and therefore it is more susceptible to factors
adversely
affecting issuers of Oregon Municipal Securities than is a tax-exempt mutual
fund
that is not concentrated in issuers of Oregon Municipal Securities to this
degree.
The State of Oregon forecasts modest acceleration of the economy, fueled by
the
impact of low interest rates on the construction sector, im-migration,
appreciating home values, continued gains in high technology manufacturing, an
expanding service sector, and strong small business income growth. However,
structural change is expected to limit the State's overall economic growth
rate.
President Clinton's forest plan is expected to cause further reductions in
timber jobs, and government employment is expected to remain weak as state and
local government revenues shrink relative to the overall economy. Non-farm
wage
and salary employment is expected to have grown 3.0% in the first quarter of
1994.
Personal income is expected to increase 6.9% in 1994, compared to growth of
5.1%
in 1993.
A recently enacted property tax limitation has adversely affected the
financial condition of the State of Oregon and many local governments. In
addition, efforts to protect threatened and endangered species have limited,
and
may further restrict, available timber supplies, and could increase costs of
power and transportation in the State. Greenwich Stret Advisors does not
believe
that the current economic conditions in Oregon will have a significant adverse
effect on
the Fund's ability to invest in high quality Oregon Municipal Bonds. Because
the
Fund's portfolio will be comprised primarily of investment grade securities,
the
Fund is expected to be less subject to market
23
<PAGE>
SMITH BARNEY SHEARSON
OREGON MUNICIPALS FUND
- --------------------------------------------------------------------
OREGON MUNICIPAL SECURITIES (CONTINUED)
and credit risks than a fund that invests primarily in lower quality Oregon
Municipal Securities. See "Special Considerations Relating to Oregon Municipal
Securities" in the Statement of Additional Information.
- --------------------------------------------------------------------
PURCHASE OF SHARES
Purchases of shares must be made through a brokerage account maintained with
Smith Barney Shearson or with an Introducing Broker. When purchasing shares of
the Fund, investors must specify whether the purchase is for Class A or Class
B
shares. No maintenance fee will be charged in connection with a brokerage
account through which an investor purchases or holds shares. Purchases are
effected at the public offering price next determined after a purchase order
is
received by Smith Barney Shearson or an Introducing Broker (the "trade date").
Payment for Fund shares is generally due to Smith Barney Shearson or an
Introducing Broker on the fifth business day (the "settlement date") after the
trade date. Investors who make payment prior to the settlement date may permit
the payment to be held in their brokerage accounts or may designate a
temporary
investment (such as a money market fund in the Smith Barney Shearson Group of
Funds) for such payment until the settlement date. The Fund reserves the right
to reject any purchase order and to suspend the offering of shares for a
period
of time.
Purchase orders received by Smith Barney Shearson or an Introducing Broker
prior to the close of regular trading on the NYSE, currently 4:00 p.m., New
York
time, on any day the Fund calculates its net asset value, are priced according
to the net asset value determined on that day. Purchase orders received after
the close of regular trading on the NYSE are priced as of the time the net
asset
value is next determined. See "Valuation of Shares."
SYSTEMATIC INVESTMENT PLAN. The Fund offers shareholders a Systematic
Investment Plan under which shareholders may authorize Smith Barney Shearson
or
an Introducing Broker to place a purchase order each month or quarter for Fund
shares in an amount not less than $100. The purchase price is paid
automatically
from cash held in the shareholder's Smith Barney Shearson brokerage account or
through the automatic redemption of the
24
<PAGE>
SMITH BARNEY SHEARSON
OREGON MUNICIPALS FUND
- -------------------------------------------------------------
PURCHASE OF SHARES (CONTINUED)
shareholder's shares of a Smith Barney Shearson money market fund. For further
information regarding the Systematic Investment Plan, shareholders should
contact their Smith Barney Shearson Financial Consultants.
MINIMUM INVESTMENTS. The minimum initial investment in the Fund is $1,000,
and
the minimum subsequent investment is $200, except that the minimum initial and
subsequent investments for the Systematic Investment Plan are both $100. There
are no minimum investment requirements for Smith Barney Shearson and its
affiliates. The Fund reserves the right to vary at any time the initial and
subsequent investment minimums. Certificates for Fund shares are issued upon
request to the Fund's transfer agent, The Shareholder Services Group, Inc.
("TSSG"), a subsidiary of First Data Corporation.
CLASS A SHARES
The public offering price for Class A shares is the per share net asset
value
of that Class plus a sales charge, which is imposed in accordance with the
following schedule:
<TABLE>
<CAPTION>
SALES CHARGE AS % SALES CHARGE
AS %
AMOUNT OF INVESTMENT* OF OFFERING PRICE OF NET ASSET
VALUE
<S> <C> <C>
- ------------------------------------------------------------------------------
- --------
Less than $25,000 4.50% 4.71%
$25,000 but under $50,000 4.00% 4.17%
$50,000 but under $100,000 3.50% 3.63%
$100,000 but under $250,000 3.00% 3.09%
$250,000 but under $500,000 2.50% 2.56%
$500,000 but under $1,000,000 1.50% 1.52%
$1,000,000 or more** 0.00% 0.00%
- ------------------------------------------------------------------------------
- -------
<FN>
*Smith Barney Shearson has adopted guidelines directing its Financial
Consultants and
Introducing Brokers that single investments of $250,000 or more should be
made in
Class A shares.
**No sales charge is imposed on purchases of Class A shares of $1 million or
more;
however, a CDSC of .75% is imposed for the first year after purchase. The
CDSC on
Class A shares is payable to Smith Barney Shearson which, with Boston
Advisors,
compensates Smith Barney Shearson Financial Consultants upon the sale of
these
shares. The CDSC is waived in the same circumstances in which the CDSC
applicable to
Class B shares is waived. See "Redemption of Shares -- Contingent Deferred
Sales Charge -- Class B Shares -- Waiver of CDSC."
</TABLE>
25
<PAGE>
SMITH BARNEY SHEARSON
OREGON MUNICIPALS FUND
- -------------------------------------------------------------
PURCHASE OF SHARES (CONTINUED)
REDUCED SALES CHARGES--CLASS A SHARES
Reduced sales charges are available to investors who are eligible to combine
their purchases of Fund shares to receive volume discounts. Investors eligible
to receive volume discounts include individuals and their immediate families,
tax-qualified employee benefit plans and trustees or other professional
fiduciaries (including a bank or an investment adviser registered with the SEC
under the Investment Advisers Act of 1940, as amended) purchasing shares for
one
or more trust estates or fiduciary accounts even though more than one
beneficiary is involved. The initial sales charge also is reduced to 1% for
Smith Barney Shearson Personal Living Trust program participants for whom
Smith
Barney Shearson acts as trustee. Reduced sales charges on Class A shares also
are available under a combined right of accumulation, under which a
shareholder
may combine the value of Class A shares already held in the Fund and in any of
the funds in the Smith Barney Shearson Group of Funds listed below (except
those
sold without a sales charge), along with the value of the Class A shares being
purchased, to qualify for a reduced sales charge. For example, if a
shareholder
owns Class A shares of the Fund and other funds in the Smith Barney Shearson
Group of Funds that have an aggregate value of $22,000, and makes an
additional
investment in Class A shares of the Fund of $4,000, the sales charge
applicable
to the additional investment would be 4%, rather than the 4.50% normally
charged
on a $4,000 purchase. Shareholders interested in further information regarding
reduced sales charges should contact their Smith Barney Shearson Financial
Consultants.
Class A shares may be offered without any applicable sales charges to: (a)
employees of Smith Barney Shearson and its affiliates and employee benefit
plans
for such employees and their immediate families when orders on their behalf
are
placed by such employees; (b) accounts managed by registered investment
advisory
subsidiaries of Travelers; (c) directors, trustees or general partners of any
investment company for which Smith Barney Shearson serves as distributor; (d)
any other investment company in connection with the combination of such
company
with the Fund by merger, acquisition of assets or otherwise; (e) shareholders
who have redeemed Class A shares in the Fund (or Class A shares of another
fund
in the Smith Barney Shearson Group of Funds that are sold with a maximum sales
charge of at least 4.50%) and who wish to reinvest their redemption proceeds
in
the Fund, provided the reinvestment is made within 30 days of the redemption;
and (f) any client of a
26
<PAGE>
SMITH BARNEY SHEARSON
OREGON MUNICIPALS FUND
- -------------------------------------------------------------
PURCHASE OF SHARES (CONTINUED)
newly employed Smith Barney Shearson Financial Consultant (for a period up to
90
days from the commencement of the Financial Consultant's employment with Smith
Barney Shearson), on the condition the purchase is made with the proceeds of
the
redemption of shares of a mutual fund which (i) was sponsored by the Financial
Consultant's prior employer, (ii) was sold to the client by the Financial
Consultant and (iii) when purchased, such shares were sold with a sales
charge.
CLASS B SHARES
The public offering price for Class B shares is the per share net asset
value
of that Class. No initial sales charge is imposed at the time of purchase. A
CDSC is imposed, however, on certain redemptions of Class B shares. See
"Redemption of Shares" which describes the CDSC in greater detail.
Smith Barney Shearson has adopted guidelines, in view of the relative sales
charges and distribution fees applicable to the Classes, directing Financial
Consultants and Introducing Brokers that all purchases of shares of $250,000
or
more should be for Class A shares. Smith Barney Shearson reserves the right to
vary these guidelines at any time.
- --------------------------------------------------------------------
REDEMPTION OF SHARES
Shareholders may redeem their shares on any day that the Fund calculates its
net
asset value. See "Valuation of Shares." Redemption requests received in proper
form prior to the close of regular trading on the NYSE are priced at the net
asset value per share determined on that day. Redemption requests received
after
the close of regular trading on the NYSE are priced at the net asset value as
next determined. If a shareholder holds shares in more than one Class, any
request for redemption must specify the Class of shares being redeemed. In the
event of a failure to specify which Class, or if the investor owns fewer
shares
of the Class than specified, the redemption request will be delayed until the
Fund's transfer agent receives further instructions from Smith Barney
Shearson,
or if the shareholder's account is not with Smith Barney Shearson, from the
shareholder directly.
The Fund normally transmits redemption proceeds for credit to the
shareholder's account at Smith Barney Shearson or to the Introducing Broker
27
<PAGE>
SMITH BARNEY SHEARSON
OREGON MUNICIPALS FUND
- -------------------------------------------------------------
REDEMPTION OF SHARES (CONTINUED)
at no charge (other than any applicable CDSC) within seven days after receipt
of
a redemption request. Generally, these funds will not be invested for the
shareholder's benefit without specific instruction and Smith Barney Shearson
will benefit from the use of temporarily uninvested funds. A shareholder who
pays for Fund shares by personal check will be credited with the proceeds of a
redemption of those shares only after the purchase check has been collected,
which may take up to 10 days or more. A shareholder who anticipates the need
for
more immediate access to his or her investment should purchase shares with
Federal funds, by bank wire or a certified or cashier's check.
A Fund account that is reduced by a shareholder to a value of $500 or less
may
be subject to redemption by the Fund, but only after the shareholder has been
given at least 30 days in which to increase the account balance to more than
$500.
Shares may be redeemed in one of the following ways:
REDEMPTION THROUGH SMITH BARNEY SHEARSON
Redemption requests may be made through Smith Barney Shearson or an
Introducing Broker. A shareholder desiring to redeem Fund shares represented
by
certificates must also present the certificates to Smith Barney Shearson or
the
Introducing Broker endorsed for transfer (or accompanied by an endorsed stock
power), signed exactly as the shares are registered. Redemption requests
involving shares represented by certificates will not be deemed received until
the certificates are received by the Fund's transfer agent in proper form.
REDEMPTION BY MAIL
Shares may be redeemed by submitting a written request for redemption to:
Smith Barney Shearson Oregon Municipals Fund
Class A or B (please specify)
c/o The Shareholder Services Group, Inc.
P.O. Box 9134
Boston, Massachusetts 02205-9134
A written redemption request to the Fund's transfer agent or your Smith
Barney
Shearson Financial Consultant must (a) state the Class and number or dollar
amount of shares to be redeemed, (b) identify the shareholder's account
28
<PAGE>
SMITH BARNEY SHEARSON
OREGON MUNICIPALS FUND
- -------------------------------------------------------------
REDEMPTION OF SHARES (CONTINUED)
number and (c) be signed by each registered owner exactly as the shares are
registered. If the shares to be redeemed were issued in certificate form, the
certificates must be endorsed for transfer (or accompanied by an endorsed
stock
power) and must be submitted to TSSG together with the redemption request. Any
signature appearing on a redemption request, share certificate or stock power
must be guaranteed by a domestic bank, savings and loan institution, domestic
credit union, member bank of the Federal Reserve System or a member firm of a
national securities exchange. TSSG may require additional supporting documents
for redemptions made by corporations, executors, administrators, trustees or
guardians. A redemption request will not be deemed properly received until
TSSG
receives all required documents in proper form.
AUTOMATIC CASH WITHDRAWAL PLAN
The Fund offers shareholders an automatic cash withdrawal plan, under which
shareholders who own shares with a value of at least $10,000 may elect to
receive periodic cash payments of at least $50 monthly. Any applicable CDSC
will
not be waived on amounts withdrawn by a shareholder that exceed 2% per month
of
the value of the shareholder's shares subject to the CDSC at the time the
withdrawal plan commences. For further information regarding the automatic
cash
withdrawal plan, shareholders should contact their Smith Barney Shearson
Financial Consultants.
CONTINGENT DEFERRED SALES CHARGE--CLASS B SHARES
A CDSC payable to Smith Barney Shearson is imposed on any redemption of
Class
B shares, however effected, that causes the current value of a shareholder's
account to fall below the dollar amount of all payments by the shareholder for
the purchase of Class B shares ("purchase payments") during the preceding five
years. No charge is imposed to the extent that the net asset value of the
Class
B shares redeemed does not exceed (a) the current net asset value of Class B
shares purchased through reinvestment of dividends or capital gains
distributions, plus (b) the current net asset value of Class B shares
purchased
more than five years prior to the redemption, plus (c) increases in the net
asset value of the shareholder's Class B shares above the purchase payments
made
during the preceding five years.
29
<PAGE>
SMITH BARNEY SHEARSON
OREGON MUNICIPALS FUND
- -------------------------------------------------------------
REDEMPTION OF SHARES (CONTINUED)
In circumstances in which the CDSC is imposed, the amount of the charge will
depend on the number of years since the shareholder made the purchase payment
from which the amount is being redeemed. Solely for the purposes of
determining
the number of years since a purchase payment, all purchase payments during a
month will be aggregated and deemed to have been made on the last day of the
preceding Smith Barney Shearson statement month.
The following table sets forth the rates of the charge for redemptions of
Class B shares by shareholders:
<TABLE>
<CAPTION>
YEARS SINCE PURCHASE PAYMENT WAS MADE
CDSC
<S> <C>
- ------------------------------------------------------------------------------
- ----
First
4.50%
Second
4.00%
Third
3.00%
Fourth
2.00%
Fifth
1.00%
Sixth
0.00%
Seventh
0.00%
Eighth
0.00%
- ------------------------------------------------------------------------------
- ----
</TABLE>
Class B shares will automatically convert to Class A shares eight years
after
the date on which they were purchased and thereafter will no longer be subject
to any distribution fee. The first of these conversions will commence on or
about September 30, 1994. See "Variable Pricing System -- Class B Shares."
The purchase payment from which a redemption of Class B shares is made is
assumed to be the earliest purchase payment from which a full redemption has
not
already been effected. In the case of redemptions of Class B shares of other
funds in the Smith Barney Shearson Group of Funds issued in exchange for Class
B
shares of the Fund, the term "purchase payments" refers to the purchase
payments
for the shares given in exchange. In the event of an exchange of Class B
shares
of funds with differing CDSC schedules, the shares will be, in all cases,
subject to the higher CDSC schedule. See "Exchange Privilege."
WAIVERS OF CDSC. The CDSC will be waived on: (a) exchanges (see "Exchange
Privilege"); (b) automatic cash withdrawals in amounts equal to or less than
2%
per month of the value of the shareholders' shares at the time
30
<PAGE>
SMITH BARNEY SHEARSON
OREGON MUNICIPALS FUND
- -------------------------------------------------------------
REDEMPTION OF SHARES (CONTINUED)
the withdrawal plan commences (see above); (c) redemption of shares following
the death or disability of the shareholders; (d) involuntary redemptions; (e)
redemption proceeds from other funds in the Smith Barney Shearson Group of
Funds
that are reinvested within 30 days of the redemption; and (f) redemptions of
shares in connection with a combination of any investment company with the
Fund
by merger, acquisition of assets or otherwise.
- --------------------------------------------------------------------
VALUATION OF SHARES
For each Class the net asset value per share is calculated on each day,
Monday
through Friday, except days on which the NYSE is closed. The NYSE currently is
scheduled to be closed on New Year's Day, Presidents' Day, Good Friday,
Memorial
Day, Independence Day, Labor Day, Thanksgiving and Christmas, and on the
preceding Friday or subsequent Monday when one of these holidays falls on a
Saturday or Sunday, respectively.
The net asset value per share of a Class is determined as of the close of
regular trading on the NYSE and is computed by dividing the value of the
Fund's
net assets attributable to that Class by the total number of shares of that
Class outstanding. Generally, the Fund's investments are valued at market
value
or, in the absence of a market value with respect to any securities, at fair
value as determined by or under the direction of the Fund's Board of Trustees.
Short-term investments that mature in 60 days or less are valued at amortized
cost whenever the Trustees determine that amortized cost reflects fair value
of
those investments. Amortized cost involves valuing an instrument at its cost
initially and, thereafter, assuming a constant amortization to maturity of any
discount or premium, regardless of the impact of fluctuating interest rates on
the market value of the instrument. Further information regarding the Fund's
valuation policies is contained in the Statement of Additional Information.
31
<PAGE>
SMITH BARNEY SHEARSON
OREGON MUNICIPALS FUND
- --------------------------------------------------------------------
EXCHANGE PRIVILEGE
Shares of each Class may be exchanged for shares of the same Class in the
following funds in the Smith Barney Shearson Group of Funds, to the extent
shares are offered for sale in the shareholder's state of residence:
<TABLE>
<CAPTION>
EXCHANGEABLE
WITH SHARES
OF THE
FOLLOWING
CLASSES: FUND NAME AND INVESTMENT OBJECTIVE:
<S> <C>
-----------------------------------------------------------------------------
- --
MUNICIPAL BOND FUNDS
A SMITH BARNEY SHEARSON LIMITED MATURITY MUNICIPALS FUND, an
intermediate-term municipal bond fund investing in
investment-grade obligations.
A, B SMITH BARNEY SHEARSON MANAGED MUNICIPALS FUND INC., an
intermediate- and long-term municipal bond fund.
A, B SMITH BARNEY SHEARSON TAX-EXEMPT INCOME FUND, an
intermediate-
and long-term municipal bond fund investing in medium- and
lower-rated securities.
A, B SMITH BARNEY SHEARSON ARIZONA MUNICIPALS FUND INC., an
intermediate- and long-term municipal bond fund designed for
Arizona investors.
A SMITH BARNEY SHEARSON INTERMEDIATE MATURITY
CALIFORNIAMUNICIPALS
FUND, an intermediate-term municipal bond fund designed for
California investors investing in investment grade
obligations
A,B SMITH BARNEY SHEARSON CALIFORNIA MUNICIPALS FUND INC.,
an intermediate- and long-term municipal bond fund designed
for California investors
A, B SMITH BARNEY SHEARSON FLORIDA MUNICIPALS FUND, an
intermediate- and long-term municipal bond fund designed for
Florida investors.
A, B SMITH BARNEY SHEARSON MASSACHUSETTS MUNICIPALS FUND, an
intermediate- and long-term municipal bond fund designed for
Massachusetts investors.
A, B SMITH BARNEY SHEARSON NEW JERSEY MUNICIPALS FUND INC., an
intermediate- and long-term municipal bond fund designed for
New Jersey investors.
</TABLE>
32
<PAGE>
SMITH BARNEY SHEARSON
OREGON MUNICIPALS FUND
- -------------------------------------------------------------
EXCHANGE PRIVILEGE (CONTINUED)
<TABLE>
<CAPTION>
EXCHANGEABLE
WITH SHARES
OF THE
FOLLOWING
CLASSES: FUND NAME AND INVESTMENT OBJECTIVE:
-----------------------------------------------------------------------------
- --
<S> <C>
A SMITH BARNEY SHEARSON INTERMEDIATE MATURITY NEW YORK
MUNICIPALS FUND, an intermediate-term municipal bond fund
designed for New York investors investing in investment
grade
obligations.
A, B SMITH BARNEY SHEARSON NEW YORK MUNICIPALS FUND INC., an
intermediate- and long-term municipal bond fund designed for
New York investors.
INCOME FUNDS
A, B SMITH BARNEY SHEARSON ADJUSTABLE RATE GOVERNMENT INCOME
FUND,
seeks high current income while limiting the degree of
fluctuation in net asset value resulting from movement in
interest rates.
A, B SMITH BARNEY SHEARSON WORLDWIDE PRIME ASSETS FUND, invests
in
a portfolio of high quality debt securities that may be
denominated in U.S. dollars or selected foreign currencies
and
that have remaining maturities of not more than one year.
A, B SMITH BARNEY SHEARSON SHORT-TERM WORLD INCOME FUND, invests
in
high quality, short-term debt securities denominated in U.S.
dollars as well as range of foreign currencies.
A SMITH BARNEY SHEARSON LIMITED MATURITY TREASURY FUND,
invests
exclusively in securities issued by the United States
Treasury
and other U.S. government securities.
A, B SMITH BARNEY SHEARSON DIVERSIFIED STRATEGIC INCOME FUND,
seeks
high current income primarily by allocating and reallocating
its assets among various types of fixed-income securities.
A, B SMITH BARNEY SHEARSON MANAGED GOVERNMENT FUND INC., invests
in
obligations issued or guaranteed by the United States
government and its agencies and instrumentalities with
emphasis on mortgage-backed government securities.
</TABLE>
33
<PAGE>
SMITH BARNEY SHEARSON
OREGON MUNICIPALS FUND
- -------------------------------------------------------------
EXCHANGE PRIVILEGE (CONTINUED)
<TABLE>
<CAPTION>
EXCHANGEABLE
WITH SHARES
OF THE
FOLLOWING
CLASSES: FUND NAME AND INVESTMENT OBJECTIVE:
-----------------------------------------------------------------------------
- --
<S> <C>
A, B SMITH BARNEY SHEARSON GOVERNMENT SECURITIES FUND, seeks a
high
current return by investing in U.S. government securities.
A, B SMITH BARNEY SHEARSON INVESTMENT GRADE BOND FUND, seeks
maximum current income consistent with prudent investment
management and preservation of capital by investing in
corporate bonds.
A, B SMITH BARNEY SHEARSON HIGH INCOME FUND, seeks high current
income by investing in high-yield corporate bonds,
debentures
and notes.
A, B SMITH BARNEY SHEARSON GLOBAL BOND FUND, seeks current income
and capital appreciation by investing in bonds, debentures
and
notes of foreign and domestic issuers.
GROWTH AND INCOME FUNDS
A*, B* SMITH BARNEY SHEARSON CONVERTIBLE FUND, seeks current income
and capital appreciation by investing in convertible
securities.
A*, B* SMITH BARNEY SHEARSON GROWTH AND INCOME FUND, seeks income
and
long-term capital growth by investing in income-producing
equity securities.
A*, B* SMITH BARNEY SHEARSON UTILITIES FUND, seeks total return by
investing in equity and debt securities of utilities
companies.
A*, B* SMITH BARNEY SHEARSON STRATEGIC INVESTORS FUND, seeks high
total return consisting of current income and capital
appreciation by investing in a combination of equity, fixed-
income and money market securities.
A*, B* SMITH BARNEY SHEARSON PREMIUM TOTAL RETURN FUND, seeks total
return by investing in dividend-paying common stocks.
</TABLE>
34
<PAGE>
SMITH BARNEY SHEARSON
OREGON MUNICIPALS FUND
- -------------------------------------------------------------
EXCHANGE PRIVILEGE (CONTINUED)
<TABLE>
<CAPTION>
EXCHANGEABLE
WITH SHARES
OF THE
FOLLOWING
CLASSES: FUND NAME AND INVESTMENT OBJECTIVE:
-----------------------------------------------------------------------------
- --
<S> <C>
GROWTH FUNDS
A*, B* SMITH BARNEY SHEARSON APPRECIATION FUND INC., seeks long-
term
appreciation of capital.
A*, B* SMITH BARNEY SHEARSON FUNDAMENTAL VALUE FUND INC., seeks
long-term capital growth with current income as a secondary
objective.
A*, B* SMITH BARNEY SHEARSON SECTOR ANALYSIS FUND, seeks capital
appreciation by following a sector strategy.
A*, B* SMITH BARNEY SHEARSON TELECOMMUNICATIONS GROWTH FUND, seeks
capital appreciation, with income as a secondary
consideration.
A*, B* SMITH BARNEY SHEARSON AGGRESSIVE GROWTH FUND INC., seeks
above-average capital growth.
A*, B* SMITH BARNEY SHEARSON SPECIAL EQUITIES FUND, seeks long-term
capital appreciation by investing in equity securities
primarily of emerging growth companies.
A*, B* SMITH BARNEY SHEARSON GLOBAL OPPORTUNITIES FUND, seeks
long-term capital growth by investing principally in the
common stocks of foreign and domestic issuers.
A*, B* SMITH BARNEY SHEARSON EUROPEAN FUND, seeks long-term capital
appreciation by investing primarily in securities of issuers
based in European countries.
A*, B* SMITH BARNEY SHEARSON PRECIOUS METALS AND MINERALS FUND
INC.,
seeks long-term capital appreciation by investing primarily
in
precious metal- and mineral-related companies and gold
bullion.
</TABLE>
35
<PAGE>
SMITH BARNEY SHEARSON
OREGON MUNICIPALS FUND
- -------------------------------------------------------------
EXCHANGE PRIVILEGE (CONTINUED)
<TABLE>
<CAPTION>
EXCHANGEABLE
WITH SHARES
OF THE
FOLLOWING
CLASSES: FUND NAME AND INVESTMENT OBJECTIVE:
-----------------------------------------------------------------------------
- --
<S> <C>
MONEY MARKET FUNDS
** SMITH BARNEY SHEARSON MONEY MARKET FUND, invests in a
diversified portfolio of high quality money market
instruments.
*** SMITH BARNEY SHEARSON DAILY DIVIDEND FUND INC., invests in a
diversified portfolio of high quality money market
instruments.
*** SMITH BARNEY SHEARSON GOVERNMENT AND AGENCIES FUND INC.,
invests in short-term U.S. government and agency securities.
*** SMITH BARNEY SHEARSON MUNICIPAL MONEY MARKET FUND INC.,
invests in short-term, high quality municipal obligations.
*** SMITH BARNEY SHEARSON CALIFORNIA MUNICIPAL MONEY MARKET
FUND,
invests in short-term, high quality California municipal
obligations.
*** SMITH BARNEY SHEARSON MUNICIPAL MONEY MARKET FUND, invests
in
short-term, high quality New York municipal obligations.
--------------------------------------------------------------------
<FN>
*Shares of this fund are subject to a higher sales charge or CDSC than that
applicable to the Fund's shares.
**Shares of this money market fund may be exchanged for Class B shares of
the
Fund.
***Shares of this money market fund may be exchanged for Class A shares of
the
Fund.
</TABLE>
TAX EFFECT. The exchange of shares of one fund for shares of another fund is
treated for Federal income tax purposes as a sale of the shares given in
exchange by the shareholder. Therefore, an exchanging shareholder may realize
a
taxable gain or loss in connection with an exchange.
CLASS A EXCHANGES. Class A shareholders of the funds in the Smith Barney
Shearson Group of Funds sold without a sales charge or with a maximum sales
charge of less than 4.50% will be subject to the appropriate "sales charge
differential" upon the exchange of their shares for Class A shares of
36
<PAGE>
SMITH BARNEY SHEARSON
OREGON MUNICIPALS FUND
- -------------------------------------------------------------
EXCHANGE PRIVILEGE (CONTINUED)
the Fund or other fund sold with a higher sales charge. The "sales charge
differential" is limited to a percentage rate no greater than the excess of
the
sales charge rate applicable to purchases of shares of the mutual fund being
acquired in the exchange over the sales charge rate(s) actually paid on the
mutual fund shares relinquished in the exchange and on any predecessor of
those
shares. For purposes of the exchange privilege, shares obtained through
automatic reinvestment of dividends, as described below, are treated as having
paid the same sales charges applicable to the shares on which the dividends
were
paid; however, if no sales charge was imposed upon the initial purchase of the
shares, any shares obtained through automatic reinvestment will be subject to
a
sales charge differential upon exchange.
CLASS B EXCHANGES. Class B shareholders of the Fund who wish to exchange all
or a portion of their Class B shares for Class B shares in any of the funds
identified above may do so without imposition of any exchange fee. In the
event
a Class B shareholder wishes to exchange all or a portion of his or her shares
for shares in any of the funds imposing a CDSC higher than that imposed by the
Fund, the exchanged Class B shares will be subject to the higher applicable
CDSC. Upon an exchange, the new Class B shares will be deemed to have been
purchased on the same date as the Class B shares of the Fund that have been
exchanged.
ADDITIONAL INFORMATION REGARDING THE EXCHANGE PRIVILEGE. Shareholders
exercising the exchange privilege with any of the other funds in the Smith
Barney Shearson Group of Funds should review the prospectus of that fund
carefully prior to making an exchange. Smith Barney Shearson reserves the
right
to reject any exchange request. The exchange privilege may be modified or
terminated at any time after written notice to shareholders.
Although the exchange privilege is an important benefit, excessive exchange
transactions can be detrimental to the Fund's performance and its
shareholders.
Greenwich Street Advisors may determine that a pattern of frequent exchanges
is excessive and contrary to the best interests of the Fund's other
shareholders. In
this event, Greenwich Street Advisors will notify Smith Barney Shearson, and
Smith Barney Shearson may, at its discretion, decide to limit additional
purchases and/or
exchanges by the shareholder. Upon such a determination, Smith Barney Shearson
will provide notice in writing or by telephone to the shareholder at least 15
days prior to suspending the exchange privilege and during the 15-day period
the
shareholder will be required to (a) redeem his or her shares in the Fund or
(b)
remain invested in the Fund or exchange into
37
<PAGE>
SMITH BARNEY SHEARSON
OREGON MUNICIPALS FUND
- -------------------------------------------------------------
EXCHANGE PRIVILEGE (CONTINUED)
any of the funds in the Smith Barney Shearson Group of Funds ordinarily
available, which position the shareholder would expect to maintain for a
significant period of time. All relevant factors will be considered in
determining what constitutes an abusive pattern of exchanges. For further
information regarding the exchange privilege or to obtain the current
prospectus
for members of the Smith Barney Shearson Group of Funds, investors should
contact their Smith Barney Shearson Financial Consultant.
- --------------------------------------------------------------------
DISTRIBUTOR
Smith Barney Shearson is located at 388 Greenwich Street, New York, New York
10013 and serves as distributor of the Fund's shares. Smith Barney Shearson is
paid an annual service fee with respect to Class A and Class B shares of the
Fund at the rate of .15% of the value of average daily net assets of the
respective Class. Smith Barney Shearson is paid an annual distribution fee
with
respect to Class B shares at the rate of .50% of the value of the average
daily
net assets attributable to those shares. The fees are authorized pursuant to a
services and distribution plan (the "Plan") adopted by the Fund pursuant to
Rule
12b-1 under the 1940 Act and are used by Smith Barney Shearson to pay its
Financial Consultants for servicing shareholder accounts and, in the case of
Class B shares, to cover expenses primarily intended to result in the sale of
those shares. These expenses include: costs of printing and distributing the
Fund's Prospectus, Statement of Additional Information and sales literature to
prospective investors; an allocation of overhead and other Smith Barney
Shearson's branch office distribution-related expenses; payments to and
expenses
of Smith Barney Shearson Financial Consultants and other persons who provide
support services in connection with the distribution of the shares; and
accruals
for interest on the amount of the foregoing expenses that exceed distribution
fees and, in the case of Class B shares, the CDSC received by Smith Barney
Shearson. The payments to Smith Barney Shearson Financial Consultants for
selling shares of a Class include a commission paid at the time of sale and a
continuing fee for servicing shareholder accounts for as long as a shareholder
remains a holder of that Class. The service fee is credited at the rate of
.15%
of the value of the average daily net assets of the particular Class of shares
that remain invested in the Fund. Smith Barney Shearson Financial Consultants
may receive different levels of compensation for selling one Class over
another.
38
<PAGE>
SMITH BARNEY SHEARSON
OREGON MUNICIPALS FUND
- -------------------------------------------------------------
DISTRIBUTOR (CONTINUED)
Payments under the Plan are not tied exclusively to the distribution and
shareholder service expenses actually incurred by Smith Barney Shearson and
the
payments may exceed distribution expenses actually incurred. The Fund's Board
of
Trustees will evaluate the appropriateness of the Plan and its payment terms
on
a continuing basis and in so doing will consider all relevant factors,
including
expenses borne by Smith Barney Shearson, amount received under the Plan and
proceeds of the CDSC.
- --------------------------------------------------------------------
DIVIDENDS, DISTRIBUTIONS AND TAXES
The Fund declares dividends from its net investment income (that is, income
other than its net realized long-and short-term capital gains) on each day the
Fund is open for business and pays dividends on the last business day of the
Smith Barney Shearson statement month. Distributions of net realized long-and
short-term capital gains, if any, are declared and paid annually after the end
of the fiscal year in which they have been earned. Unless a shareholder
instructs that dividends and capital gains distributions on shares of any
Class
be paid in cash and credited to the shareholder's account, dividends and
capital
gains distributions will be reinvested automatically in additional shares of
the
Class at net asset value, subject to no sales charge or CDSC. The Fund's
earnings for Saturdays, Sundays and holidays are declared as dividends on the
next business day. Shares redeemed during the month are entitled to dividends
declared up to and including the date of redemption. In addition, in order to
avoid the application of a 4% nondeductible excise tax on certain
undistributed
amounts of ordinary income and capital gains, the Fund may make an additional
distribution shortly before December 31 in each year of any undistributed
ordinary income or capital gains and expects to make any other distributions
as
are necessary to avoid the application of this tax.
If, for any full fiscal year, the Fund's total distributions exceed current
and accumulated earnings and profits, the excess distributions generally will
be
treated as a tax-free return of capital (up to the amount of the shareholder's
tax basis in his or her shares). The amount treated as a tax-free return of
capital will reduce a shareholder's adjusted basis in his or her shares.
Pursuant to the requirements of the 1940 Act and other applicable laws, a
notice
will accompany any distribution paid from sources other than net investment
income. In the event the Fund distributes amounts in excess of its net
39
<PAGE>
SMITH BARNEY SHEARSON
OREGON MUNICIPALS FUND
- -------------------------------------------------------------
DIVIDENDS, DISTRIBUTIONS AND TAXES (CONTINUED)
investment income and net realized capital gains, such distributions may have
the effect of decreasing the Fund's total assets, which may increase the
Fund's
expense ratio.
TAXES
The Fund expects to qualify and intends to continue to qualify each year as
a
regulated investment company under the Code and will designate and pay
exempt-interest dividends derived from interest earned on qualifying tax-
exempt
obligations. Such exempt-interest dividends may be excluded by shareholders of
the Fund from their gross income for Federal income tax purposes although (a)
all or a portion of such exempt-interest dividends will be a specific
preference
item for purposes of the Federal individual and corporate alternative minimum
taxes to the extent they are derived from certain types of private activity
bonds issued after August 7, 1986 and (b) all exempt-interest dividends will
be
a component of the "current earnings" adjustment item for purposes of the
Federal corporate alternative minimum tax. In addition, corporate shareholders
may incur a greater Federal "environmental" tax liability through the receipt
of
the Fund's dividends and distributions. Dividends derived from interest on
Oregon Municipal Securities also will be exempt from Oregon state personal
income (but not corporate franchise or corporate income) taxes.
Dividends paid from taxable net investment income, if any, and distributions
of any net realized short-term capital gains (whether from tax-exempt or
taxable
securities) are taxable to shareholders as ordinary income, regardless of how
long they have held their Fund shares and whether such dividends or
distributions are received in cash or reinstated in additional Fund shares.
Distributions of net realized long-term capital gains are taxable to
shareholders as long-term capital gains, regardless of how long they have held
their Fund shares and whether such distributions are received in cash or
reinvested in additional shares. Furthermore, as a general rule, a
shareholder's
gain or loss on a sale or redemption of his or her shares will be a long-term
capital gain or loss if the shareholder has held the shares for more than one
year and will be a short-term capital gain or loss if the shareholder has held
the shares for one year or less. The Fund's dividends and distributions will
not
qualify for the dividends-received deduction for
40
<PAGE>
SMITH BARNEY SHEARSON
OREGON MUNICIPALS FUND
- -------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS AND TAXES (CONTINUED)
corporations. The per share dividends and distributions on Class A shares will
be higher than those on Class B shares as a result of lower distribution and
transfer agency fees applicable to Class A shares.
Statements as to the tax status of each shareholder's dividends and
distributions are mailed annually. Each shareholder will also receive, if
appropriate, various written notices after the close of the Fund's prior
taxable
year as to the Federal income tax status of his or her dividends and
distributions which were received from the Fund during the Fund's prior
taxable
year. These statements may set forth the dollar amount of income excluded or
exempt from Federal income taxes or Oregon state personal income taxes and the
dollar amount, if any, subject to such taxes. Moreover, these statements will
designate the amount of exempt-interest dividends that is a specific
preference
item for purposes of the Federal individual and corporate alternative minimum
taxes. Shareholders should consult their tax advisors with specific reference
to
their own tax situations.
TAX-EXEMPT INCOME VS. TAXABLE INCOME
The table below shows Oregon taxpayers how to translate Federal and Oregon
state tax savings from investments such as the Fund into an equivalent return
from a taxable investment. To the extent that the equivalent taxable yields,
illustrated in this table, are based on an effective tax rate which combines
the
Federal and Oregon marginal income tax rates, the table is not
41
<PAGE>
SMITH BARNEY SHEARSON
OREGON MUNICIPALS FUND
- -------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS AND TAXES (CONTINUED)
applicable to individuals who do not pay Oregon state income tax. The yields
used below are for illustration only and are not intended to represent current
or future yields for the Fund, which may be higher or lower than those shown.
<TABLE>
<CAPTION>
COMBINED
FEDERAL OREGON COMBINED EFFECTIVE
TAXABLE INCOME* MARGINAL MARGINAL MARGINAL MARGINAL TAX
EXEMPT YIELDS
SINGLE JOINT RATE RATE RATE RATE 4.00% 5.00%
6.00% 7.00% 8.00% 9.00%
<S> <C> <C> <C> <C> <C> <C> <C>
<C> <C> <C> <C>
-----------------------------------------------------------------------------
- --------------------
EQUIVALENT TAXABLE YIELDS
$ 22,100 $ 36,900 15.00% 6.00% 21.00% 20.10% 5.01% 6.26%
7.51% 8.76% 10.01% 11.26%
53,500 89,150 28.00% 9.30% 37.30% 34.70% 6.13% 7.66%
9.19% 10.72% 12.25% 13.78%
106,190 140,000 31.00% 9.30% 40.30% 37.42% 6.39% 7.99%
9.59% 11.19% 12.78% 14.38%
212,380 250,000 36.00% 10.00% 46.00% 42.40% 6.94% 8.68%
10.42% 12.15% 13.89% 15.63%
250,000 424,760 39.60% 11.00% 50.60% 46.24% 7.44% 9.30%
11.16% 13.02% 14.88% 16.74%
-----------------------------------------------------------------------------
- --------
<FN>
*Combined effective marginal tax rate represents the combined Federal and
Oregon state income tax
rates adjusted to account for the Federal deduction of state taxes paid. The
combined marginal
income tax rate is lower than the sum of the Federal and Oregon state
marginal rates because the
state taxes that shareholders of the Fund will pay are deductible from
Federal taxable income.
</TABLE>
The Federal tax rates and Oregon state tax rates shown are those presently
in
effect for 1994 and are subject to change. The calculations reflected in the
table assume that no income will be subject to the Federal or state
alternative
minimum taxes.
- --------------------------------------------------------------------
ADDITIONAL INFORMATION
The Fund was organized on [March 10], 1994 under the laws of the
Commonwealth
of Massachusetts and is a business entity commonly known as a "Massachusetts
business trust." The Fund offers shares of beneficial interest, with a par
value
of $.001 per share.
Each Class of shares has a par value of $.001 per share and represents an
identical interest in the Fund's investment portfolio. As a result, the
Classes
have the same rights, privileges and preferences, except with respect to: (a)
the designation of each Class; (b) the effect of the respective sales charges
for each Class; (c) the distribution and/or service fees borne by each Class;
(d) the expenses allocable exclusively to each Class; (e) voting rights on
matters exclusively affecting a single Class; (f) the exchange privilege of
each
Class; and (g) the conversion feature of the Class B shares. The Fund's
42
<PAGE>
SMITH BARNEY SHEARSON
OREGON MUNICIPALS FUND
- -------------------------------------------------------------
ADDITIONAL INFORMATION (CONTINUED)
Board of Trustees does not anticipate that there will be any conflicts among
the
interests of the holders of the different Classes. The Trustees, on an ongoing
basis, will consider whether any such conflict exists and, if so, take
appropriate action.
The Fund does not hold annual shareholder meetings. There normally will be
no
meetings of shareholders for the purpose of electing Trustees unless and until
such time as less than a majority of the Trustees holding office have been
elected by shareholders. The Trustees will call a meeting for any purpose upon
written request of shareholders holding at least 10% of the Fund's outstanding
shares. When matters are submitted for shareholder vote, shareholders of each
Class will have one vote for each full share owned and a proportionate,
fractional vote for any fractional share held of that Class. Generally, shares
of the Fund will be voted on a Fund-wide basis on all matters except matters
affecting only the interests of one Class.
Boston Safe Deposit and Trust Company, a wholly owned subsidiary of TBC, is
located at One Boston Place, Boston, Massachusetts 02108, and serves as
custodian of the Fund's investments.
TSSG is located at Exchange Place, Boston, Massachusetts 02109, and serves
as
the Fund's transfer agent.
The Fund sends to each of its shareholders a semi-annual report and an
audited
annual report, which include listings of the investment securities held by the
Fund at the end of the period covered. In an effort to reduce the Fund's
printing and mailing costs, the Fund plans to consolidate the mailing of its
semi-annual and annual reports by household. This consolidation means that a
household having multiple accounts with the identical address of record will
receive a single copy of each report. In addition, the Fund also plans to
consolidate the mailing of its Prospectus so that a shareholder having
multiple
accounts will receive a single Prospectus annually. Any shareholder who does
not
want this consolidation to apply to his or her account should contact his or
her
Financial Consultant or TSSG. Shareholders may make inquiries regarding the
Fund
to their Smith Barney Shearson Financial Consultants.
43
<PAGE>
SMITH BARNEY SHEARSON
OREGON MUNICIPALS FUND
- -------------------------------------------------------------
ADDITIONAL INFORMATION (CONTINUED)
-------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, THE STATEMENT
OF
ADDITIONAL INFORMATION AND/OR THE FUND'S OFFICIAL SALES LITERATURE IN
CONNECTION
WITH THE OFFERING OF THE FUND'S SHARES, AND, IF GIVEN OR MADE, SUCH OTHER
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED
BY THE FUND. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER IN ANY STATE IN
WHICH,
OR TO ANY PERSON TO WHOM, SUCH OFFER MAY NOT LAWFULLY BE MADE.
44
<PAGE>
SMITH BARNEY SHEARSON
OREGON
MUNICIPALS
FUND
Two World Trade Center
New York, New York 10048
[Fund 146]
[FD0209 F3]
<PAGE>
Smith Barney Shearson
OREGON MUNICIPALS FUND
Two World Trade Center
New York, New York 10048
(212) 720-9218
<TABLE>
<S> <C>
STATEMENT OF ADDITIONAL INFORMATION
</TABLE>
MAY [15],
1994
This Statement of Additional Information expands upon and supplements the
information contained in the current Prospectus of Smith Barney Shearson
Oregon
Municipals Fund (the "Fund") dated May 15, 1994, as amended or supplemented
from time to time, and should be read in conjunction with the Fund's
Prospectus.
The Fund's Prospectus may be obtained from your Smith Barney Shearson
Financial
Consultant or by writing or calling the Fund at the address or telephone
number
set forth above. This Statement of Additional Information, although not in
itself a prospectus, is incorporated by reference into the Prospectus in its
entirety.
CONTENTS
For ease of reference, the same section headings are used in both the
Prospectus
and this Statement of Additional Information, except where shown below:
<TABLE>
<S>
<C>
Management of the
Fund................................................................
1
Investment Objective and Management
Policies.......................................... 4
Municipal Bonds (See in the Prospectus "Oregon Municipal
Securities")................. 11
Purchase of
Shares....................................................................
16
Redemption of
Shares..................................................................
17
Distributor...................................................................
........ 18
Valuation of
Shares...................................................................
19
Exchange
Privilege....................................................................
20
Performance Data (See in the Prospectus "The Fund's
Performance")..................... 20
Taxes (See in the Prospectus "Dividends, Distributions and
Taxes").................... 22
Custodian and Transfer Agent (See in the Prospectus "Additional
Information")......... 25
Organization and Description of Fund
Shares.......................................................... 25
Financial
Statement..................................................................
26
Appendix......................................................................
........ A-1
</TABLE>
MANAGEMENT OF THE FUND
The executive officers of the Fund are employees of certain of the
organizations
that provide services to the Fund. These organizations are as follows:
<TABLE>
<CAPTION>
NAME SERVICE
<S> <C>
Smith Barney Shearson Inc.
("Smith Barney Shearson")...................................... Distributor
Greenwich Street Advisors........................................ Investment
Adviser
Mutual Management Corp...........................................
Administrator
The Boston Company Advisors, Inc.
("Boston Advisors")............................................ Sub-
administrator
Boston Safe Deposit and Trust Company
("Boston Safe")................................................ Custodian
The Shareholder Services Group, Inc. ("TSSG"),
a subsidiary of First Data Corporation......................... Transfer
Agent
</TABLE>
These organizations and the functions they perform for the Fund are
discussed
in the Prospectus and in this Statement of Additional Information.
<PAGE>
TRUSTEES AND EXECUTIVE OFFICERS OF THE FUND
The Trustees and executive officers of the Fund, together with information as
to
their principal business occupations during the past five years, are set
forth
below. Each Trustee who is an "interested person" of the Fund, as defined in
the
Investment Company Act of 1940, as amended (the "1940 Act"), is indicated by
an
asterisk.
Herbert Barg, Trustee. Private investor. His address is 273
Montgomery
Avenue, Bala Cynwyd, Pennsylvania 19004.
*Alfred J. Bianchetti, Trustee. Retired; formerly Senior Consultant to
Dean
Witter Reynolds Inc. His address is 19 Circle End Drive, Ramsey, New
Jersey
17466.
Martin Brody, Director. Vice Chairman of the Board of Restaurant
Associates
Corp.; a Director of Jaclyn, Inc. His address is HMK Associates, Three
ADP
Boulevard, Roseland, New Jersey 07068.
Dwight B. Crane, Trustee. Professor, Graduate School of
Business
Administration, Harvard University; a Director of Peer Review Analysis, Inc.
His
address is Graduate School of Business Administration, Harvard
University,
Boston, Massachusetts 02163.
James J. Crisona, Trustee. Attorney; formerly a Justice of the Supreme
Court
of the State of New York. His address is 118 East 60th Street, New York,
New
York 10022.
Robert A. Frankel, Trustee. Management Consultant; retired Vice President
of
The Reader's Digest Association, Inc. His address is 102 Grand
Street,
Croton-on-Hudson, New York 10520.
Dr. Paul Hardin, Trustee. Chancellor of the University of North Carolina
at
Chapel Hill; a Director of The Summit Bancorporation. His address is
University
of North Carolina, 103 S. Building, Chapel Hill, North Carolina 27599.
Stephen E. Kaufman, Trustee. Attorney; Director of Michigan Energy
Resources
Corp. His address is 277 Park Avenue, New York, New York 10172.
Joseph J. McCann, Trustee. Financial Consultant; formerly, Vice President
of
Ryan Homes, Inc. His address is 200 Oak Park Place, Pittsburgh,
Pennsylvania
15243.
*Heath B. McLendon, Chairman of the Board and Investment Officer.
Executive
Vice President of Smith Barney Shearson and Chairman of Smith Barney
Shearson Strategy Advisers Inc.; prior to July 1993. Senior Executive Vice
President of Shearson Lehman Brothers Inc. ("Shearson Lehman Brothers");
Vice Chairman of Shearson Asset Management, a member of the Asset
Management Group of Shearson Lehman Brothers; a Director of PanAgora Asset
Management, Inc. and PanAgora Asset Management Limited. His address is
Two World Trade Center, New York, New York
10048.
Stephen J.. Treadway, President. Executive Vice President of Smith Barney
Shearson; Director and President of Mutual management Corp. and Smith, Barney
Advisers, Inc.; Trustee of Corporate Realty Income Trust I. His address is
1345 Avenue of the Americas, New York, New York 10105.
Richard P. Roelofs, Executive Vice President. Managing Director of
Smith
Barney Shearson; President of Smith Barney Shearson Strategy Advisers
Inc.;
prior to July 1993, Senior Vice President of Shearson Lehman Brothers;
Vice
President of Shearson Lehman Investment Strategy Advisors Inc., an
investment
advisory affiliate of Shearson Lehman Brothers. His address is Two World
Trade
Center, New York, New York 10048.
2
<PAGE>
, Vice President and Investment Officer. Managing Director
of
Greenwich Street Advisors; prior to July 1993, Managing Director of Shearson
Lehman Advisors. His address is Two World Trade Center, New York, New
York
10048.
Vincent Nave, Treasurer. Senior Vice President of Boston Advisors and
Boston
Safe. His address is One Boston Place, Boston, Massachusetts 02108.
Francis J. McNamara, III, Secretary. Senior Vice President and
General
Counsel of Boston Advisors; prior to June 1989, Vice President and
Associate
Counsel of Boston Advisors. His address is One Boston Place,
Boston,
Massachusetts 02108.
Each Trustee also serves as a director, trustee or general partner of
other
mutual funds for which Smith Barney Shearson serves as distributor. As of
April
30, 1994, the Trustees and officers of the Fund as a group owned no shares
of
the outstanding common stock of the Fund.
No director, officer or employee of Smith Barney Shearson, Boston Advisors
or
any parent or subsidiary receives any compensation from the Fund for serving
as
an officer or Trustee of the Fund. The Fund pays each Trustee who is not
an
officer, director or employee of Smith Barney Shearson, Boston Advisors or
any
of their affiliates a fee of $[2,000] per annum plus $[500] per meeting
attended
and reimburses them for travel and out-of-pocket expenses.
INVESTMENT ADVISER--GREENWICH STREET ADVISORS
ADMINISTRATOR--MUTUAL MANAGEMENT CORP.
Greenwich Street Advisors serves as investment adviser to the Fund and
Mutual
Management Corp. serves as administrator for the Fund pursuant to a
written
agreement dated May [15], 1994 (the "Advisory Agreement"), which was approved
by
the Board of Trustees, including a majority of those Trustees who are
not
"interested persons" of the Fund, Greenwich Street Advisors or Mutual
Management Corp., on April 20, 1994. The services provided by Greenwich
Street Advisors and Mutual Management Corp. under the Advisory Agreement
are described in the Prospectus. Greenwich Street Advisors and Mutual
Management Corp. pay the salaries of all officers and employees who are
employed by both them and the Fund. Greenwich Street Advisors and Mutual
Management Corp. bear all expenses in connection with the performance of
their services. Greenwich Street Advisors is a division of Mutual Management
Corp., which is in turn a wholly owned subsidiary of Smith Barney
Shearson Holdings Inc. ("Holdings"). Holdings is a wholly owned
subsidiary of The Travelers Inc. ("Travelers"). As compensation for the
services rendered to the
Fund by Greenwich Street Advisors and Mutual Management Corp., the Fund pays
a
fee computed daily and paid monthly at the following annual rates: .55% of
the
value of the Fund's average daily net assets up to $500 million [and .52% of
the
value of its average daily net assets in excess of $500 million].
SUB-ADMINISTRATOR--BOSTON ADVISORS
[Certain services are provided to the Fund by Boston Advisors pursuant to
the
Sub-administration Agreement and are described in the Prospectus under
"Management
of the Fund." In addition to those services, Boston Advisors pays the
salaries
of all officers and employees who are employed by both it and the
Fund,
maintains office facilities for the Fund, furnishes the Fund with
statistical
and research data, clerical help and accounting, data processing,
bookkeeping,
internal auditing and legal services and certain other services required by
the
Fund, prepares reports to the Fund's shareholders and prepares tax returns
and
3
<PAGE>
reports to and filings with the Securities and Exchange Commission (the
"SEC")
and state blue sky authorities. Boston Advisors bears all expenses in
connection
with the performance of its services. Under the Sub-administration
Agreement
approved by the Trustees on April 20, 1994, Boston Advisors is compensated in
such
amounts as the Fund, Mutual Management Corp. and Boston Advisors shall from
time
to time agree. The compensation of Mutual Management Corp. is reduced by
amounts
paid to Boston Advisors.
The Fund bears expenses incurred in its operations, including:
taxes,
interest, brokerage fees and commissions, if any; fees of Trustees who are
not
officers, directors, shareholders or employees of Smith Barney Shearson,
Mutual
Management Corp. or Boston Advisors; SEC fees and state blue sky
qualification
fees; charges of custodians; transfer and dividend disbursing agent's
fees;
certain insurance premiums; outside auditing and legal expenses; costs of
any
independent pricing service; costs of maintaining the Fund's existence;
costs
attributable to investor services (including allocated telephone and
personnel
expenses); costs of preparation and printing of prospectuses for
regulatory
purposes and for distribution to existing shareholders; costs of
shareholders'
reports and shareholders' meetings and meetings of the Fund's Board of
Trustees
and officers.
Greenwich Street Advisors and Mutual Management Corp. have each agreed
that
if in any fiscal year the aggregate expenses of the Fund (including fees
payable
pursuant to the Advisory Agreement and the Administration Agreement,
but
excluding interest, taxes, brokerage and, with the prior written consent of
the
necessary state securities commissions, extraordinary expenses) exceed
the
expense limitations of any state having jurisdiction over the Fund,
Greenwich
Street Advisors and Mutual Management Corp. will, to the extent required
by
state law, reduce their management fees by the amount of such excess
expenses,
such amount to be allocated between them in the proportion their respective
fees
bear to the aggregate of such fees paid by the Fund. Such fee reductions,
if
any, will be reconciled on a monthly basis. The most restrictive state
expense
limitation presently applicable to the Fund would require Greenwich
Street
Advisors and Mutual Management Corp. to reduce their fees in any year that
such
expenses exceed 2.5% of the first $30 million of average daily net assets, 2%
of
the next $70 million of average daily net assets and 1.5% of the
remaining
average daily net assets.]
COUNSEL AND AUDITORS
Willkie Farr & Gallagher serves as legal counsel to the Fund.
acts as special Oregon counsel for the Fund and has reviewed the portions of
the
Prospectus and this Statement of Additional Information concerning Oregon
taxes
and the description of the special considerations relating to investments
in
Oregon municipal securities. The Trustees who are not "interested persons"
of
the Fund have selected Stroock & Stroock & Lavan as their counsel.
Coopers & Lybrand, independent accountants, One Post Office Square,
Boston,
Massachusetts 02109, serve as auditors of the Fund and render an opinion on
the
Fund's financial statements annually.
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES
The Prospectus discusses the Fund's investment objective and the policies
it
employs to achieve that objective. The following discussion supplements
the
description of the Fund's investment policies in the Prospectus. For purposes
of
this Statement of Additional Information, obligations of non-Oregon
municipal
issuers, the interest on which is excluded from gross income for Federal
income
tax purposes, together with
4
<PAGE>
obligations of the State of Oregon, local governments in the State of Oregon
and
certain other municipal issuers such as the Commonwealth of Puerto Rico
("Oregon
Municipal Securities"), are collectively referred to as "Municipal Bonds."
As noted in the Prospectus, the Fund is classified as a non-
diversified
investment company under the 1940 Act, which means that the Fund is not
limited
by the 1940 Act in the proportion of its assets that may be invested in
the
obligations of a single issuer. The identification of the issuer of
Municipal
Bonds generally depends upon the terms and conditions of the security. When
the
assets and revenues of an agency, authority, instrumentality or other
political
subdivision are separate from those of the government creating the
issuing
entity and the security is backed only by the assets and revenues of
such
entity, such entity would be deemed to be the sole issuer. Similarly, in
the
case of a private activity bond, if that bond is backed only by the assets
and
revenues of the nongovernmental user, then such nongovernmental user is
deemed
to be the sole issuer. If in either case, however, the creating government
or
some other entity guarantees a security, such a guarantee would be considered
a
separate security and would be treated as an issue of such government or
other
entity.
USE OF RATINGS AS INVESTMENT CRITERIA
In general, the ratings of Moody's Investors Service, Inc. ("Moody's")
and
Standard & Poor's Corporation ("S&P") represent the opinions of those
agencies
as to the quality of the Municipal Bonds and short-term investments which
they
rate. It should be emphasized, however, that such ratings are relative
and
subjective, are not absolute standards of quality and do not evaluate the
market
risk of securities. These ratings will be used by the Fund as initial
criteria
for the selection of portfolio securities, but the Fund also will rely upon
the
independent advice of Greenwich Street Advisors to evaluate
potential
investments. Among the factors that will be considered are the long-term
ability
of the issuer to pay principal and interest and general economic trends. To
the
extent the Fund invests in lower-rated and comparable unrated securities,
the
Fund's achievement of its investment objective may be more dependent
on
Greenwich Street Advisors' credit analysis of such securities than would be
the
case for a portfolio consisting entirely of higher-rated securities.
The
Appendix contains information concerning the ratings of Moody's and S&P
and
their significance.
Subsequent to its purchase by the Fund, an issue of Municipal Bonds may
cease
to be rated or its rating may be reduced below the rating given at the time
the
securities were acquired by the Fund. Neither event will require the sale
of
such Municipal Bonds by the Fund, but Greenwich Street Advisors will
consider
such event in its determination of whether the Fund should continue to hold
the
Municipal Bonds. In addition, to the extent that the ratings change as a
result
of changes in such organizations or their rating systems or due to a
corporate
restructuring of Moody's or S&P, the Fund will attempt to use comparable
ratings
as standards for its investments in accordance with its investment objective
and
policies.
The Fund generally may invest up to 25% of its total assets in
securities
rated below investment grade, I.E., lower than Baa, MIG 3 or Prime-1 by
Moody's
or BBB, SP-2 or A-1 by S&P, or in unrated securities of comparable quality.
Such
securities (a) will likely have some quality and protective
characteristics
that, in the judgment of the rating organization, are outweighed by
large
uncertainties or major risk exposures to adverse conditions and (b)
are
predominantly speculative with respect to the issuer's capacity to pay
interest
and repay principal in accordance with the terms of the obligation.
Zero coupon securities involve special considerations. Zero coupon
securities
are debt obligations which do not entitle the holder to any periodic payments
of
interest prior to maturity of a specified cash
5
<PAGE>
payment date when the securities begin paying current interest (the
"cash
payment date") and therefore are issued and traded at a discount from their
face
amounts or par values. The discount varies depending on the time remaining
until
maturity or cash payment date, prevailing interest rates, liquidity of
the
security and the perceived credit quality of the issuer. The discount, in
the
absence of financial difficulties of the issuer, decreases as the final
maturity
or cash payment date of the security approaches. The market prices of
zero
coupon securities generally are more volatile than the market prices of
other
debt securities that pay interest periodically and are likely to respond
to
changes in interest rates to a greater degree than do debt securities
having
similar maturities and credit quality. The credit risk factors pertaining
to
low-rated securities also apply to low-rated zero coupon bonds. Such zero
coupon
bonds carry an additional risk in that, unlike bonds which pay
interest
throughout the period to maturity, the Fund will realize no cash until the
cash
payment date unless a portion of such securities is sold and, if the
issuer
defaults, the Fund may obtain no return at all on its investment.
Current Federal income tax laws may require the holder of certain zero
coupon
securities to accrue income with respect to such securities prior to the
receipt of
cash payments. To maintain its qualification as a registered investment
company
and avoid liability for Federal income taxes, the Fund may be required
to
distribute income accrued with respect to such zero coupon securities and may
have to
dispose of portfolio securities under disadvantageous circumstances in order
to
generate cash to satisfy these distribution requirements.
TEMPORARY INVESTMENTS
When the Fund is maintaining a defensive position, the Fund may invest
in
short-term investments ("Temporary Investments") consisting of: (a)
the
following tax-exempt securities: notes of municipal issuers having, at the
time
of purchase, a rating within the three highest grades of Moody's or S&P or,
if
not rated, having an issue of outstanding Municipal Bonds rated within the
three
highest grades by Moody's or S&P; and (b) the following taxable
securities:
obligations of the United States government, its agencies or
instrumentalities
("U.S. government securities"), repurchase agreements, other debt
securities
rated within the three highest grades by Moody's or S&P, commercial paper
rated
in the highest grade by either of such rating services, and certificates
of
deposit of domestic banks with assets of $1 billion or more. The Fund may
invest
in Temporary Investments for defensive reasons in anticipation of a
market
decline. At no time will more than 20% of the Fund's total assets be invested
in
Temporary Investments unless the Fund has adopted a defensive investment
policy.
The Fund intends, however, to purchase tax-exempt Temporary Investments
pending
the investment of the proceeds of the sale of portfolio securities or shares
of
the Fund, or in order to have highly liquid securities available to
meet
anticipated redemptions.
INVESTMENTS IN FINANCIAL FUTURES CONTRACTS AND OPTIONS ON FINANCIAL FUTURES
CONTRACTS
The Fund may invest in financial futures contracts and options on
financial
futures contracts that are traded on a domestic exchange or board of trade.
Such
investments may be made by the Fund solely for the purpose of hedging
against
changes in the value of its portfolio securities due to anticipated changes
in
interest rates and market conditions, and not for purposes of
speculation.
Further, such investments will be made only in unusual circumstances, such
as
when Greenwich Street Advisors anticipates an extreme change in interest
rates
or market conditions.
Unlike the purchase or sale of a Municipal Bond, no consideration is paid
or
received by the Fund upon the purchase or sale of a futures contract.
Initially,
the Fund will be required to deposit with the broker
an
6
<PAGE>
amount of cash or cash equivalents equal to approximately 10% of the
contract
amount (this amount is subject to change by the board of trade on which
the
contract is traded and members of such board of trade may charge a
higher
amount). This amount is known as initial margin and is in the nature of
a
performance bond or good faith deposit on the contract which is returned to
the
Fund upon termination of the futures contract, assuming that all
contractual
obligations have been satisfied. Subsequent payments, known as variation
margin,
to and from the broker, will be made on a daily basis as the price of the
index
fluctuates, making the long and short positions in the futures contract more
or
less valuable, a process known as marking-to-market. At any time prior to
the
expiration of the contract, the Fund may elect to close the position by
taking
an opposite position, which will operate to terminate the Fund's
existing
position in the futures contract.
There are several risks in connection with the use of futures contracts as
a
hedging device. Successful use of futures contracts by the Fund is subject
to
Greenwich Street Advisors' ability to predict correctly movements in the
direction of interest rates. Such predictions involve skills and techniques
which may be
different from those involved in the management of a long-term municipal
bond
portfolio. In addition, there can be no assurance that there will be
a
correlation between movements in the price of the municipal bond index
and
movements in the price of the Municipal Bonds which are the subject of
the
hedge. The degree of imperfection of correlation depends upon
various
circumstances, such as variations in speculative market demand for
futures
contracts and municipal securities, technical influences on futures trading,
and
differences between the municipal securities being hedged and the
municipal
securities underlying the futures contracts, in such respects as interest
rate
levels, maturities and creditworthiness of issuers. A decision of whether,
when
and how to hedge involves the exercise of skill and judgment and even
a
well-conceived hedge may be unsuccessful to some degree because of
market
behavior or unexpected trends in interest rates.
Although the Fund intends to purchase or sell futures contracts only if
there
is an active market for such contracts, there is no assurance that a
liquid
market will exist for the contracts at any particular time. Most
domestic
futures exchanges and boards of trade limit the amount of fluctuation
permitted
in futures contract prices during a single trading day. The daily
limit
establishes the maximum amount the price of a futures contract may vary
either
up or down from the previous day's settlement price at the end of a
trading
session. Once the daily limit has been reached in a particular contract,
no
trades may be made that day at a price beyond that limit. The daily
limit
governs only price movement during a particular trading day and, therefore,
does
not limit potential losses because the limit may prevent the liquidation
of
unfavorable positions. It is possible that futures contract prices could move
to
the daily limit for several consecutive trading days with little or no
trading,
thereby preventing prompt liquidation of futures positions and subjecting
some
futures traders to substantial losses. In such event, it will not be possible
to
close a futures position and, in the event of adverse price movements, the
Fund
would be required to make daily cash payments of variation margin. In
such
circumstances, an increase in the value of the portion of the portfolio
being
hedged, if any, may partially or completely offset losses on the
futures
contract. As described above, however, there is no guarantee that the price
of
Municipal Bonds will, in fact, correlate with the price movements in
the
municipal bond index futures contract and thus provide an offset to losses on
a
futures contract.
If the Fund has hedged against the possibility of an increase in
interest
rates adversely affecting the value of the Municipal Bonds held in its
portfolio
and rates decrease instead, the Fund will lose part or all of the benefit of
the
increased value of the Municipal Bonds it has hedged because it will
have
offsetting losses in its
7
<PAGE>
futures positions. In addition, in such situations, if the Fund has
insufficient
cash, it may have to sell securities to meet daily variation
margin
requirements. Such sales of securities may, but will not necessarily, be
at
increased prices which reflect the decline in interest rates. The Fund may
have
to sell securities at a time when it may be disadvantageous to do so.
When the Fund purchases municipal bond index futures contracts, an amount
of
cash and U.S. government securities or other high grade debt securities equal
to
the market value of the futures contracts will be deposited in a
segregated
account with the Fund's custodian (and/or such other persons as appropriate)
to
collateralize the positions and thereby insure that the use of such
futures
contracts is not leveraged. In addition, the ability of the Fund to trade
in
municipal bond index futures contracts and options on interest rate
futures
contracts may be materially limited by the requirements of the Internal
Revenue
Code of 1986, as amended (the "Code"), applicable to a regulated
investment
company. See "Taxes" below.
OPTIONS ON FINANCIAL FUTURES CONTRACTS. The Fund may purchase put and
call
options on futures contracts which are traded on a domestic exchange or board
of
trade as a hedge against changes in interest rates, and may enter into
closing
transactions with respect to such options to terminate existing positions.
The
Fund will sell put and call options on interest rate futures contracts only
as
part of closing sale transactions to terminate its options positions. There
is
no guarantee that such closing transactions can be effected.
Options on futures contracts, as contrasted with the direct investment
in
such contracts, gives the purchaser the right, in return for the premium
paid,
to assume a position in futures contracts at a specified exercise price at
any
time prior to the expiration date of the options. Upon exercise of an
option,
the delivery of the futures position by the writer of the option to the
holder
of the option will be accompanied by delivery of the accumulated balance in
the
writer's futures contract margin account, which represents the amount by
which
the market price of the futures contract exceeds, in the case of a call, or
is
less than, in the case of a put, the exercise price of the option on the
futures
contract. The potential loss related to the purchase of an option on
interest
rate futures contracts is limited to the premium paid for the option
(plus
transaction costs). Because the value of the option is fixed at the point
of
sale, there are no daily cash payments to reflect changes in the value of
the
underlying contract; however, the value of the option does change daily and
that
change would be reflected in the net asset value of the Fund.
There are several risks relating to options on futures contracts. The
ability
to establish and close out positions on such options will be subject to
the
existence of a liquid market. In addition, the Fund's purchase of put or
call
options will be based upon predictions as to anticipated interest rate trends
by
Greenwich Street Advisors, which could prove to be inaccurate. Even if
Greenwich
Street Advisors' expectations are correct there may be an imperfect
correlation
between the change in the value of the options and of the Fund's
portfolio
securities.
REPURCHASE AGREEMENTS. The Fund may enter into repurchase agreements
with
banks which are the issuers of instruments acceptable for purchase by the
Fund
and with certain dealers on the Federal Reserve Bank of New York's list
of
reporting dealers. A repurchase agreement is a contract under which the buyer
of
a security simultaneously commits to resell the security to the seller at
an
agreed-upon price on an agreed-upon date. Under the terms of a
typical
repurchase agreement, the Fund would acquire an underlying debt obligation for
a
relatively short period (usually not more than seven days) subject to
an
obligation of the seller to repurchase, and the Fund to resell, the
obligation
at an agreed-upon price and time, thereby
8
<PAGE>
determining the yield during the Fund's holding period. This arrangement
results
in a fixed rate of return that is not subject to market fluctuations during
the
Fund's holding period. Under each repurchase agreement, the selling
institution
will be required to maintain the value of the securities subject to
the
repurchase agreement at not less than their repurchase price.
Repurchase
agreements could involve certain risks in the event of default or insolvency
of
the other party, including possible delays or restrictions upon the
Fund's
ability to dispose of the underlying securities, the risk of a possible
decline
in the value of the underlying securities during the period in which the
Fund
seeks to assert its rights to them, the risk of incurring expenses
associated
with asserting those rights and the risk of losing all or part of the
income
from the agreement. In evaluating these potential risks, Greenwich
Street
Advisors or Boston Advisors, acting under the supervision of the Fund's Board
of
Trustees, reviews on an ongoing basis the value of the collateral and
the
creditworthiness of those banks and dealers with which the Fund enters
into
repurchase agreements.
INVESTMENT RESTRICTIONS
The Fund has adopted the following investment restrictions for the protection
of
shareholders. Restrictions 1 through 7 below may not be changed without
the
approval of the holders of a majority of the outstanding shares of the
Fund,
defined as the lesser of (a) 67% of the Fund's shares present at a meeting
if
the holders of more than 50% of the outstanding shares are present in person
or
by proxy or (b) more than 50% of the Fund's outstanding shares. The
remaining
restrictions may be changed by the Fund's Board of Trustees at any time.
The Fund may not:
1. Issue senior securities as defined in the 1940 Act and any rules
and
orders thereunder, except insofar as the Fund may be deemed to
have
issued senior securities by reason of: (a) borrowing money or
purchasing
securities on a when-issued or delayed-delivery basis; (b) purchasing
or
selling futures contracts and options on futures contracts and other
similar
instruments; and (c) issuing separate classes of shares.
2. Invest more than 25% of its total assets in securities, the issuers
of
which are in the same industry. For purposes of this limitation,
U.S.
government securities and securities of state or municipal governments
and
their political subdivisions are not considered to be issued by members
of
any industry.
3. Borrow money, except that the Fund may borrow from banks for temporary
or
emergency (not leveraging) purposes, including the meeting of
redemption
requests which might otherwise require the untimely disposition
of
securities, in an amount not exceeding 10% of the value of the Fund's
total
assets (including the amount borrowed) valued at market less liabilities
(not
including the amount borrowed) at the time the borrowing is made.
Whenever
borrowings exceed 5% of the value of the Fund's total assets, the Fund
will
not make any additional investments.
4. Make loans. This restriction does not apply to: (a) the purchase of
debt
obligations in which the Fund may invest consistent with its
investment
objective and policies; (b) repurchase agreements; and (c) loans of
its
portfolio securities.
5. Engage in the business of underwriting securities issued by
other
persons, except to the extent that the Fund may technically be deemed
to
be an underwriter under the Securities Act of 1933, as amended, in
disposing
of portfolio securities.
9
<PAGE>
6. Purchase or sell real estate, real estate mortgages, real
estate
investment trust securities, commodities or commodity contracts, but
this
shall not prevent the Fund from: (a) investing in securities of
issuers
engaged in the real estate business and securities which are secured by
real
estate or interests therein; (b) holding or selling real estate received
in
connection with securities it holds; or (c) trading in futures contracts
and
options on futures contracts.
7. Purchase any securities on margin (except for such short-term credits
as
are necessary for the clearance of purchases and sales of
portfolio
securities) or sell any securities short (except against the box).
For
purposes of this restriction, the deposit or payment by the Fund of
initial
or maintenance margin in connection with futures contracts and
related
options and options on securities is not considered to be the purchase of
a
security on margin.
8. Purchase or otherwise acquire any security if, as a result, more than
15%
of its net assets would be invested in securities that are illiquid.
9. Purchase or sell oil and gas interests.
10. Invest more than 5% of the value of its total assets in the securities
of
issuers having a record, including predecessors, of less than three
years
of continuous operation, except U.S. government securities. For purposes
of
this restriction, issuers include predecessors, sponsors,
controlling
persons, general partners, guarantors and underlying assets.
11. Invest in companies for the purpose of exercising control.
12. Invest in securities of other investment companies, except as they may
be
acquired as part of a merger, consolidation or acquisition of assets.
13. Engage in the purchase or sale of put, call, straddle or spread
options
or in the writing of such options, except as is consistent with
the
Fund's investment objective and policies.
Certain restrictions listed above permit the Fund to engage in
investment
practices that the Fund does not currently pursue. The Fund has no
present
intention of altering its current investment practices as otherwise described
in
the Prospectus and this Statement of Additional Information and any
future
change in those practices would require Board approval and appropriate notice
to
shareholders. If a percentage restriction is complied with at the time of
an
investment, a later increase or decrease in the percentage of assets
resulting
from a change in the values of portfolio securities or in the amount of
the
Fund's assets will not constitute a violation of such restriction. In order
to
permit the sale of the Fund's shares in certain states, the Fund may
make
commitments more restrictive than the restrictions described above. Should
the
Fund determine that any such commitment is no longer in the best interests
of
the Fund and its shareholders it will revoke the commitment by terminating
sales
of its shares in the state involved.
PORTFOLIO TRANSACTIONS
Newly issued securities normally are purchased directly from the issuer or
from
an underwriter acting as principal. Other purchases and sales usually are
placed
with those dealers from which it appears the best price or execution will
be
obtained; those dealers may be acting as either agents or principals.
The
purchase price paid by the Fund to underwriters of newly issued
securities
usually includes a concession paid by the issuer to the underwriter,
and
purchases of after-market securities from dealers normally are executed at
a
price between the bid and asked prices.
10
<PAGE>
Allocation of transactions, including their frequency, to various dealers
is
determined by Greenwich Street Advisors in its best judgment and in a
manner
deemed fair and reasonable to shareholders. The primary considerations
are
availability of the desired security and the prompt execution of orders in
an
effective manner at the most favorable prices. Subject to these
considerations,
dealers that provide supplemental investment research and statistical or
other
services to Greenwich Street Advisors may receive orders for
portfolio
transactions by the Fund. Information so received enables Greenwich
Street
Advisors to supplement their own research and analysis with the views
and
information of other securities firms. Such information may be useful
to
Greenwich Street Advisors in serving both the Fund and other clients,
and,
conversely, supplemental information obtained by the placement of business
of
other clients may be useful to Greenwich Street Advisors in carrying out
its
obligations to the Fund.
The Fund will not purchase Municipal Bonds during the existence of
any
underwriting or selling group relating thereto of which Smith Barney Shearson
is
a member, except to the extent permitted by the SEC. Under
certain
circumstances, the Fund may be at a disadvantage because of this limitation
in
comparison with other investment companies which have a similar
investment
objective but which are not subject to such limitation.
While investment decisions for the Fund are made independently from those
of
the other accounts managed by Greenwich Street Advisors, investments of the
type
the Fund may make also may be made by those other accounts. When the Fund
and
one or more other accounts managed by Greenwich Street Advisors are prepared
to
invest in, or desire to dispose of, the same security, available investments
or
opportunities for sales will be allocated in a manner believed by
Greenwich
Street Advisors to be equitable to each. In some cases, this procedure
may
adversely affect the price paid or received by the Fund or the size of
the
position obtained or disposed of by the Fund.
PORTFOLIO TURNOVER
The Fund's portfolio turnover rate (the lesser of purchases or sales
of
portfolio securities during the year, excluding purchases or sales of short-
term
securities, divided by the monthly average value of portfolio
securities)
generally is not expected to exceed 100%, but the portfolio turnover rate
will
not be a limiting factor whenever the Fund deems it desirable to sell
or
purchase securities. Securities may be sold in anticipation of a rise
in
interest rates (market decline) or purchased in anticipation of a decline
in
interest rates (market rise) and later sold. In addition, a security may be
sold
and another security of comparable quality may be purchased at approximately
the
same time in order to take advantage of what the Fund believes to be a
temporary
disparity in the normal yield relationship between the two securities.
These
yield disparities may occur for reasons not directly related to the
investment
quality of particular issues or the general movement of interest rates, such
as
changes in the overall demand for or supply of various types of tax-
exempt
securities.
MUNICIPAL BONDS
GENERAL INFORMATION
Municipal Bonds generally are understood to include debt obligations issued
to
obtain funds for various public purposes, including the construction of a
wide
range of public facilities, refunding of outstanding obligations, payment
of
general operating expenses and extensions of loans to public institutions
and
facilities. Private activity bonds that are issued by or on behalf of
public
authorities to finance various
11
<PAGE>
privately operated facilities are included within the term Municipal Bonds
if
the interest paid thereon qualifies as excluded from gross income (but
not
necessarily from alternative minimum taxable income) for Federal income
tax
purposes in the opinion of bond counsel to the issuer.
The yields on Municipal Bonds are dependent upon a variety of
factors,
including general economic and monetary conditions, general money
market
conditions, general conditions of the Municipal Bond market, the
financial
condition of the issuer, the size of a particular offering, the maturity of
the
obligation offered and the rating of the issue.
Municipal Bonds also are subject to the provisions of bankruptcy,
insolvency
and other laws affecting the rights and remedies of creditors, such as
the
Federal Bankruptcy Code, and laws, if any, that may be enacted by Congress
or
state legislatures extending the time for payment of principal or interest,
or
both, or imposing other constraints upon enforcement of such obligations or
upon
the ability of municipalities to levy taxes. There is also the possibility
that,
as a result of litigation or other conditions, the power or ability of any
one
or more issuers to pay, when due, the principal of and interest on its or
their
Municipal Bonds may be materially affected.
WHEN-ISSUED SECURITIES
The Fund may purchase Municipal Bonds on a "when-issued" basis (I.E.,
for
delivery beyond the normal settlement date at a stated price and yield).
The
payment obligation and the interest rate that will be received on the
Municipal
Bonds purchased on a when-issued basis are each fixed at the time the
buyer
enters into the commitment. Although the Fund will purchase Municipal Bonds on
a
when-issued basis only with the intention of actually acquiring the
securities,
the Fund may sell these securities before the settlement date if it is
deemed
advisable as a matter of investment strategy.
Municipal Bonds are subject to changes in value based upon the
public's
perception of the creditworthiness of the issuers and changes, real
or
anticipated, in the level of interest rates. In general, Municipal Bonds tend
to
appreciate when interest rates decline and depreciate when interest rates
rise.
Purchasing Municipal Bonds on a when-issued basis, therefore, can involve
the
risk that the yields available in the market when the delivery takes place
may
actually be higher than those obtained in the transaction itself. To account
for
this risk, a separate account of the Fund consisting of cash or liquid
debt
securities equal to the amount of the when-issued commitments will
be
established at the Fund's custodian bank. For the purpose of determining
the
adequacy of the securities in the account, the deposited securities will
be
valued at market or fair value. If the market or fair value of such
securities
declines, additional cash or securities will be placed in the account on a
daily
basis so the value of the account will equal the amount of such commitments
by
the Fund. Placing securities rather than cash in the segregated account may
have
a leveraging effect on the Fund's net assets. That is, to the extent the
Fund
remains substantially fully invested in securities at the same time it
has
committed to purchase securities on a when-issued basis, there will be
greater
fluctuations in its net assets than if it had set aside cash to satisfy
its
purchase commitments. Upon the settlement date of the when-issued
securities,
the Fund will meet obligations from then-available cash flow, sale of
securities
held in the segregated account, sale of other securities or, although
it
normally would not expect to do so, from the sale of the when-issued
securities
themselves (which may have a value greater or less than the Fund's
payment
obligations). Sales of securities to meet such obligations may involve
the
realization of capital gains, which are not exempt from Federal income taxes
or
Oregon state personal income tax.
12
<PAGE>
When the Fund engages in when-issued transactions, it relies on the seller
to
consummate the trade. Failure of the seller to do so may result in the
Fund's
incurring a loss or missing an opportunity to obtain a price considered to
be
advantageous.
SPECIAL CONSIDERATIONS RELATING TO OREGON MUNICIPAL SECURITIES
Some of the significant financial considerations relating to the
Fund's
investments in Oregon Municipal Obligations are summarized below. This
summary
information is derived principally from official statements and
prospectuses
relating to securities offerings of the State of Oregon and various
local
agencies in Oregon, available as of the date of this Statement of
Additional
Information and does not purport to be a complete description of any of
the
considerations mentioned herein. The accuracy and completeness of
the
information contained in such official statements has not been
independently
verified.
EMPLOYMENT. Oregon's economy has outperformed the nation's economy
in
recent years. Oregon employment increased 15.4 %between 1987 and 1992;
national employment during the same period increased only 6.1 %. However,
in 1990 and 1991, total employment remained relatively flat, and
unemployment
increased. In 1992, growth resumed at an annual rate of 1.6%. The
unemployment rate in 1991 was 6.0 %. 7.3 % in 1992, and has ranged
from 7.0 to 7.8 % in the first ten months of 1993.
As the economy has grown, it has diversified, becoming less dependent on
the
forest products industry and expanding the number of high technology
industries.
Compared to 1980, 15,500 fewer people worked in lumber and
products
manufacturing in 1992, while 7,700 more people worked in high
technology
sectors.
Most of the recent job gains have come from nonmanufacturing sectors.
Since
1985, nonmanufacturing employment has increased by 27 %, led by trade (up
23 %), services (up 41 %) and construction (up 53 %).
Nonmanufacturing sectors now provide more than 83 %of total Oregon
employment.
Per capita income growth in recent years has often outpaced the
national
average. Oregon per capita income increased 2.7% in 1991 and 4.0% in 1992;
in
each of those years Oregon per capita income was 92% of United States per
capita
income.
STATE FORECAST. In December of 1993, the State of Oregon forecast
modest
acceleration of the economy into 1994, fueled by the impact of low
interest
rates on the construction sector, in-migration, appreciating home
values,
continued gains in high technology manufacturing, an expanding service
sector,
and strong small business income growth. However, structural change is
expected
to limit the State's overall economic growth rate. President Clinton's
forest
plan is expected to cause further reductions in timber jobs, and
government
employment is expected to remain weak as state and local government
revenue
shrinks relative to the overall economy. Nonfarm wage and salary employment
is
expected to grow 3.0% in the first quarter of 1994. Personal income is
expected
to increase 6.9% in 1994, compared to growth of 5.1 %in 1993.
The State forecasts that inflation-adjusted personal income during the
1990s
will grow at a substantially more rapid rate than it did in the 1980s, but at
a
substantially slower rate than it did in the 1960s
and
13
<PAGE>
1970s. Population in the 1990s is expected to grow at more than twice the
rate
recorded in the 1980s. On a per capita basis, inflation-adjusted personal
income
in the 1990s is expected to grow at a slower rate than any of the
previous
post-World War II decades.
POPULATION. Oregon's population as of July 1, 1993 was estimated to
be
3,038,000. Since 1960 the State's population has increased almost 72 %;
between 1980 and 1990, Oregon's population increased approximately 7.7 %.
There are four major population areas in Oregon. The City of
Portland,
located at the northern end of the Willamette Valley, is the largest city in
the
State, and its primary metropolitan statistical area was estimated to have
a
population of 1,285,100 in 1991, or 44 percent of the total State
population.
The City of Eugene, located at the southern end of the Willamette Valley, is
the
second largest city, with a metropolitan statistical area of 290,900, or
10%
of the State's total population. Salem, located in the middle of the
Willamette Valley, is the third largest city, has a metropolitan
statistical
area of 287,900, or 10% of the State's total population. The fourth
largest city, Medford, is located in southwestern Oregon outside the
Willamette
Valley, and has a metropolitan statistical area of 151,400. Approximately
70
percent of the State's population resides in the Willamette Valley.
West Oregon consists largely of small coastal communities which focus
on
tourism, fishing, agriculture and dairy operations. Central Oregon, west of
the
Cascade Mountains, has the Willamette Valley, Oregon's four largest cities,
and
the highly economically diversified Portland metropolitan area. East of
the
Cascade Mountains, communities tend to be smaller, and economic activity
centers
on agriculture, forestry and ranching. A number of small, timber
dependent
communities throughout the State have been particularly adversely affected by
the
recent reductions in timber and forest products employment. Local economies
in
Oregon vary substantially, and respond to different factors; statistical data
on
economic activity in the State as a whole may mask significant differences
in
local economies.
HOUSING, AGRICULTURE, TRADE, FOREST PRODUCTS AND TOURISM. Much of
the
recent and forecast growth in the Oregon nonmanufacturing sectors can be
traced
to population growth. Oregon's quality of life and low housing costs have
always
encouraged in-migration. The State's rapid job growth since 1987 pushed
Oregon's
population growth above the nation's. The growth caused Oregon housing starts
to
increase in 1988, 1989 and 1990, even though national housing starts
declined.
In 1990, Oregon housing starts increased by one percent, compared to a
national
decline of 12.9%. In 1991, housing starts declined, but increased again in
1992.
Oregon has a highly diversified agricultural base, with gross farm sales
of
over $2.5 billion in 1992, over 84 commodities with sales of $1,000,000 or
more,
and over 37 commodities with gross sales of $10,000,000 or more. Agriculture
in
Oregon follows the national trend of increasing capital intensity,
with
employment decreasing as constant dollar output has increased.
Recent
agricultural expansion is attributable to use of more efficient methods
and
increased use of irrigation. Although every county in the State is involved
in
agricultural production, activity is concentrated in the Willamette Valley.
Oregon's forest products industry consists of several components: lumber
and
wood products, paper and allied products, and a small number of workers
in
reforestation and other services. Employment for paper and allied products
has
remained relatively constant at about 9,000. Reforestation currently
employs
14
<PAGE>
about 4,000, and has been growing steadily. Lumber and wood products,
once
Oregon's manufacturing mainstay, has experienced massive, and
probably
permanent, reductions in employment, with jobs declining from about 65,000
to
about 50,000 during the period from 1988 to 1992.
Oregon is located on the western coast of the United States, where
the
Columbia River flows into the Pacific Ocean. International trade and exports
are
an important part of the Oregon economy, with much of the trade
occurring
through Oregon's 23 port districts. The Port of Portland is most active,
having
developed an efficient system for dealing with large numbers of
vessels,
including modern grain elevators, cranes, break-bulk and containerized-
cargo
facilities and ship repair and dry dock facilities. Chief export items
include
grains, logs, lumber and other forest products, paper and paper
products,
vegetables, metal products and chemical/petroleum products. The value of
foreign
exports through the Oregon Columbia-Snake River Customs District, which
includes
the Port of Portland, was in excess of $7.1 billion in 1992, and had
increased
approximately 98%from 1987 levels. Items imported in amounts in excess
of $100 million in 1991 include cars, chemical/petroleum products,
metals/metal
products, food and headwear/flat goods, computing equipment,
electronic
components, electrical machinery, general purpose machinery and
rubber/plastic.
Imports through the Oregon Columbia-Snake River Customs District
increased
approximately 14%over the five-year period beginning in 1987, but have
declined an average of 4.1%in the years 1991 and 1992.
Tourism is a rapidly growing segment of the Oregon economy. The State
has
major mountain ranges, vast coastal and desert regions, and multi-use
and
wilderness forest areas. There are more than 400 miles of seacoast, 47,000
miles
of streams, 1,400 lakes and reservoirs, 225 state parks and a national park
in
Oregon. 6.8 million people were estimated to visit the State in 1989-1990.
Hotel
and motel occupancies increased approximately 14 percent in the 1990
fiscal
year, and room tax revenues increased 42% for 1987-89 and 68% for
1989-91.
DEVELOPMENTS AFFECTING THE OREGON ECONOMY AND CREDITWORTHINESS OF
OREGON. In November 1990, the Oregon voters approved an initiative petition
("Measure Five") amending the Oregon Constitution to limit property taxes
and
certain other charges against property. The measure imposes a maximum tax
rate
for non-school local governments of $10/$1,000 of property value, and
a
declining rate for schools which begin at $15/$1,000 and declines $5/$1,000
in
the fiscal year 1995-1996. Measure Five has an exemption for voter
approved
general obligation bonds issued by local governments, and an exemption
for
general obligation bonds issued by the State of Oregon. However, there is
no
exemption for taxes collected for operating purposes. Measure Five has
an
adverse effect on the financial condition of the State of Oregon and on
all
local governments which impose ad valorem taxes in areas where the aggregate
tax
rate exceeds the measure's limits.
Although the State of Oregon does not currently levy property taxes,
the
State is adversely affected because Measure Five requires the State
to
contribute State funds to make up tax revenues lost by school districts as
a
result of Measure Five. The State's required contribution to the schools
under
Measure Five is estimated to be $1.6 billion in the 1993-1995 biennium and
$1.4
billion in the 1995-1997 biennium. The required contribution for the 1993-
1995
biennium is estimated to be 26%of the State's forecast general fund
revenue in the 1993-1995 biennium.
15
<PAGE>
The Oregon Legislature meets in regular session once every two years, and
is
not scheduled to meet in regular session again until January of 1995. The
1993
regular session of the Oregon legislature referred a tax reform proposal,
which
included a sales tax, to the Oregon voters in November of 1993. The proposal
was
defeated by a substantial margin.
Measure Five adversely affects the financial condition of many
school
districts, because the total amount of property taxes and State funding
each
school district receives is often less than it would have been if Measure
Five
had not been enacted. The reduction occurs because the Oregon Legislature
has
reduced the portion of its contribution to Oregon schools which is not
mandated
by Measure Five, and because State replacement revenues are
distributed
proportionally among districts, not based on the actual losses of
individual
districts.
Measure Five adversely affects non-school local governments which levy
taxes
in areas where the aggregate tax rate exceeds $10/$1,000. Generally, these
areas
are population centers.
The Oregon Supreme Court has held that tax increment, or urban
renewal
revenues collected to pay bonds are subject to Measure Five's $10/$1,000
limit.
Measure Five also limits certain kinds of charges which are not property
taxes.
Litigation is pending which, if resolved adversely to local governments,
could
limit the ability of municipal utilities to impose certain kinds of
municipal
utility and other charges.
Pending litigation, environmental proceedings and President Clinton's
new
timber management plans relating to the logging of old growth forests and
the
protection of the Northern Spotted Owl make it difficult to predict
future
timber supplies in Oregon. In addition, proceedings to protect
threatened
anadromous fish species in the Columbia River and other Oregon waterways
may
require changes to the operations of locks and dams on those waterways.
These
changes could adversely affect regional power production and the cost of
moving
trade goods along these waterways.
ADDITIONAL CONSIDERATIONS. With respect to Municipal Obligations issued
by
the State of Oregon and its political sub-divisions, the Fund cannot
predict
what legislation, if any, may be proposed in the Oregon State Legislature
as
regards the Oregon State personal income tax status of interest on
such
obligations, or which proposals, if any, might be enacted. Such proposals,
if
enacted, might materially adversely affect the availability of Oregon
Municipal
Obligations for investment by the Fund and the value of the Fund's portfolio.
In
such an event, the Trustees would reevaluate the Fund's investment objective
and
policies and consider changes in its structure or possible dissolution.
PURCHASE OF SHARES
VOLUME DISCOUNTS
The schedule of sales charges on Class A shares described in the
Prospectus
applies to purchases made by any "purchaser," which is defined to include
the
following: (a) an individual; (b) an individual's immediate family
purchasing
shares for his or her own account; (c) a trustee or other fiduciary
purchasing
shares for a single trust estate or single fiduciary account; (d) a
pension,
profit sharing or other employee benefit plan qualified under Section 401(a)
of
the Code and qualified employee benefit plans of employers who are
"affiliated
persons" of each other within the meaning of the 1940 Act; (e) tax-
exempt
organizations enumerated in Section 501(c)(3) or (13) of the Code; (f) any
other
organized group of persons, provided the organization has been in existence
for
at least six months and was organized for a purpose other than the purchase
of
investment company securities at a discount; or (g) a trustee or
other
professional fiduciary
16
<PAGE>
(including a bank, or an investment adviser registered with the SEC under
the
Investment Advisers Act of 1940) purchasing shares of the Fund for one or
more
trust estates or fiduciary accounts. Purchasers who wish to combine
purchase
orders to take advantage of volume discounts on Class A shares should
contact
their Smith Barney Shearson Financial Consultants.
COMBINED RIGHT OF ACCUMULATION
Reduced sales charges, in accordance with the schedule in the Prospectus,
apply
to any purchase of Class A shares if the aggregate investment in Class A
shares
of the Fund and in Class A shares of other funds in the Smith Barney
Shearson
Group of Funds that are sold with a sales charge, including the purchase
being
made, of any purchaser is $25,000 or more. The reduced sales charge is
subject to confirmation of the shareholder's holdings through a check
of
appropriate records. The Fund reserves the right to terminate or amend
the
combined right of accumulation at any time after notice to shareholders.
For
further information regarding the right of accumulation, shareholders
should
contact their Smith Barney Shearson Financial Consultants.
DETERMINATION OF PUBLIC OFFERING PRICE
The Fund offers its shares to the public on a continuous basis. The
public
offering price per Class A share of the Fund is equal to the net asset value
per
share at the time of purchase plus a sales charge based on the aggregate
amount
of the investment. The public offering price per Class B share (and Class
A
share purchases, including applicable rights of accumulation, equaling
or
exceeding $1 million), is equal to the net asset value per share at the time
of
purchase and no sales charge is imposed at the time of purchase. A
contingent
deferred sales charge ("CDSC"), however, is imposed on certain redemptions
of
Class B shares and Class A shares when purchased in amounts equalling
or
exceeding $1 million. The method of computing the public offering price is
shown
in the Fund's financial statements, which are incorporated by reference into
this Statement of Additional Information.
REDEMPTION OF SHARES
The right of redemption may be suspended or the date of payment postponed
(a)
for any period during which the New York Stock Exchange, Inc. ("NYSE") is
closed
(other than for customary weekend and holiday closings), (b) when trading in
the
markets the Fund normally utilizes is restricted, or an emergency, as
determined
by the SEC, exists making disposal of the Fund's investments or determination
of
net asset value not reasonably practicable or (c) for such other periods as
the
SEC by order may permit for protection of the Fund's shareholders.
DISTRIBUTIONS IN KIND
If the Fund's Board of Trustees determines that it would be detrimental to
the
best interests of the remaining shareholders of the Fund to make a
redemption
payment wholly in cash, the Fund may pay, in accordance with rules adopted
by
the SEC, any portion of a redemption in excess of the lesser of $250,000 or
1%
of the Fund's net assets by a distribution in kind of portfolio securities
in
lieu of cash. Portfolio securities issued in a distribution in kind will
be
readily marketable, although shareholders receiving distributions in kind
may
incur brokerage commissions when subsequently disposing of those securities.
17
<PAGE>
AUTOMATIC CASH WITHDRAWAL PLAN
An automatic cash withdrawal plan (the "Withdrawal Plan") is available
to
shareholders who own shares with a value of at least $10,000 and who wish
to
receive specific amounts of cash periodically. Withdrawals of at least
$50
monthly may be made under the Withdrawal Plan by redeeming as many shares of
the
Fund as may be necessary to cover the stipulated withdrawal payment.
Any
applicable CDSC will not be waived on amounts withdrawn by shareholders
that
exceed 2% per month of the value of a shareholder's shares at the time
the
Withdrawal Plan commences. To the extent withdrawals exceed
dividends,
distributions and appreciation of a shareholder's investment in the Fund,
the
value of the shareholder's investment will be reduced and continued
withdrawal
payments may reduce the shareholder's investment and ultimately exhaust
it.
Withdrawal payments should not be considered as income from investment in
the
Fund. Furthermore, as it generally would not be advantageous to a shareholder
to
make additional investments in the Fund at the same time he or she
is
participating in the Withdrawal Plan, purchases by such shareholder in
amounts
of less than $5,000 ordinarily will not be permitted.
Shareholders who wish to participate in the Withdrawal Plan and who
hold
their shares in certificate form must deposit their share certificates with
TSSG
as agent for Withdrawal Plan members. All dividends and distributions on
shares
in the Withdrawal Plan are reinvested automatically at net asset value
in
additional shares of the Fund. All applications for participation in
the
Withdrawal Plan must be received by TSSG as Withdrawal Plan agent no later
than
the eighth day of the month to be eligible for participation beginning with
that
month's withdrawal. The Withdrawal Plan will not be carried over on
exchanges
between funds or classes of the Fund ("Classes"). A new Withdrawal
Plan
application is required to establish the Withdrawal Plan in the new fund
or
Class. For additional information, shareholders should contact their
Smith
Barney Shearson Financial Consultants.
DISTRIBUTOR
Smith Barney Shearson serves as the Fund's distributor on a best efforts
basis
pursuant to a written agreement dated May [15], 1994 (the "Distribution
Agreement"), which was approved by the Board of Trustees on April 20, 1994.
Smith Barney Shearson forwards investors' funds for the purchase of shares
five business days after placement of purchase orders (i.e., the
"settlement date"). When payment is made by the investor before settlement
date, unless otherwise directed by the investor, the funds will be held
as a free credit balance in the investor's brokerage account, and
Smith Barney Shearson may benefit from the temporary use of the funds.
The
investor may designate another use for the funds prior to settlement date,
such
as an investment in a money market fund (other than the Smith
Barney
Shearson Money Market Fund) in the Smith Barney Shearson Group of Funds. If
the
investor instructs Smith Barney Shearson to invest the funds in a money
market
fund in the Smith Barney Shearson Group of Funds, the amount of the
investment
will be included as part of the average daily net assets of both the Fund
and
the money market fund, and affiliates of Smith Barney Shearson which serve
the
funds in an investment advisory capacity will benefit by
receiving investment management fees from both such investment companies,
computed on the basis of their average daily net assets. The Fund's Board
of
Trustees has been advised of the benefits to Smith Barney Shearson
resulting
from five-day settlement procedures and will take such benefits
into
consideration when reviewing the Advisory and Distribution Agreements
for
continuance.
18
<PAGE>
DISTRIBUTION ARRANGEMENTS
Shares of the Fund are distributed on a best efforts basis by Smith
Barney
Shearson as exclusive sales agent of the Fund pursuant to the
Distribution
Agreement. To compensate Smith Barney Shearson for the services it provides
and
for the expense it bears under the Distribution Agreement, the Fund has
adopted
a services and distribution plan (the "Plan") pursuant to Rule 12b-1 under
the
1940 Act. Under the Plan, the Fund pays Smith Barney Shearson a service
fee,
accrued daily and paid monthly, calculated at the annual rate of .15% of
the
value of the Fund's average daily net assets attributable to the Class A
and
Class B shares. In addition, Class B shares pay a distribution fee intended
to
compensate Smith Barney Shearson for its initial expense of paying
financial
consultants a commission upon sales of the respective shares. The Class
B
distribution fees are calculated at the annual rate of .50% of the value of
the
Fund's average net assets attributable to the shares of the Class.
Under its terms, the Plan continues from year to year, provided
such
continuance is approved annually by vote of the Fund's Board of
Trustees,
including a majority of the Trustees who are not interested persons of the
Fund
and who have no direct or indirect financial interest in the operation of
the
Plan or in the Distribution Agreement (the "Independent Trustees"). The Plan
may
not be amended to increase the amount of the service and distribution
fees
without shareholder approval, and all material amendments of the Plan also
must
be approved by the Trustees and Independent Trustees in the manner
described
above. The Plan may be terminated at any time with respect to a Class,
without
penalty, by vote of a majority of the Independent Trustees or by a vote of
a
majority of the outstanding voting securities of the Class (as defined in
the
1940 Act). Pursuant to the Plan, Smith Barney Shearson will provide the
Fund's
Board of Trustees periodic reports of amounts expended under the Plan and
the
purpose for which such expenditures were made.
VALUATION OF SHARES
The Prospectus discusses the time at which the net asset value of shares of
each
Class is determined for purposes of sales and redemptions. Because
of the differences in distribution fees and Class-specific expenses, the
per
share net asset value of each Class will differ. The following is a
description
of the procedures used by the Fund in valuing its assets.
The valuation of the Fund's assets is made by Boston Advisors
after
consultation with an independent pricing service (the "Service") approved by
the
Fund's Board of Trustees. When, in the judgment of the Service, quoted
bid
prices for investments are readily available and representative of the bid
side
of the market, these investments are valued at the mean between the quoted
bid
and asked prices. Investments for which, in the judgment of the Service,
there
is no readily obtainable market quotation (which may constitute a majority
of
the portfolio securities) are carried at fair value as determined by
the
Service. For the most part, such investments are liquid and may be readily
sold.
The Service may employ electronic data processing techniques and/or a
matrix
system to determine valuations. The procedures of the Service are
reviewed
periodically by the officers of the Fund under the general supervision
and
responsibility of the Board of Trustees, which may replace any such Service
at
any time if it determines it to be in the best interest of the Fund to do so.
19
<PAGE>
EXCHANGE PRIVILEGE
Except as noted below, shareholders of any fund in the Smith Barney
Shearson
Group of Funds may exchange all or part of their shares for shares of the
same
Class of other funds in the Smith Barney Shearson Group of Funds, to the
extent
such shares are offered for sale in the shareholder's state of residence, on
the
basis of relative net asset value per share at the time of exchange as
follows:
A. Class A shares of any fund purchased with a sales charge may
be
exchanged for Class A shares of any of the other funds, and the
sales
charge differential, if any, will be applied. Class A shares of any
fund
may be exchanged without a sales charge for shares of the funds that
are
offered without a sales charge. Class A shares of any fund
purchased
without a sales charge may be exchanged for shares sold with a
sales
charge, and the appropriate sales charge differential will be applied.
B. Class A shares of any fund acquired by a previous exchange of
shares
purchased with a sales charge may be exchanged for Class A shares of
any
of the other funds, and the sales charge differential, if any, will
be
applied.
C. Class B shares of any fund may be exchanged without a sales
charge.
Class B shares of the Fund exchanged for Class B shares of another
fund
will be subject to the higher applicable CDSC of the two funds and,
for
purposes of calculating CDSC rates and conversion periods, will be
deemed
to have been held since the date the shares being exchanged
were
purchased.
Dealers other than Smith Barney Shearson must notify TSSG of the
investor's
prior ownership of Class A shares of Smith Barney Shearson High Income Fund
and
the account number in order to accomplish an exchange of shares of the
High
Income Fund under paragraph B above.
The exchange privilege enables shareholders to acquire shares of the
same
Class in a fund with different investment objectives when they believe that
a
shift between funds is an appropriate investment decision. This privilege
is
available to shareholders resident in any state in which the Fund shares
being
acquired may legally be sold. Prior to any exchange, the shareholder
should
obtain and review a copy of the current prospectus of each fund into which
an
exchange is being considered. Prospectuses may be obtained from your Smith
Barney
Shearson Financial Consultant.
Upon receipt of proper instructions and all necessary supporting
documents,
shares submitted for exchange are redeemed at the then-current net asset
value
and, subject to any applicable CDSC, the proceeds immediately invested, at
a
price as described above, in shares of the fund being acquired. Smith
Barney
Shearson reserves the right to reject any exchange request. The
exchange
privilege may be modified or terminated at any time after notice
to
shareholders.
PERFORMANCE DATA
From time to time, the Fund may quote yield or total return of a Class
in
advertisements or in reports and other communications to shareholders. To
the
extent any advertisement or sales literature of the Fund describes the
expenses
or performance of any Class, it will also disclose such information for
the
other Class.
20
<PAGE>
YIELD
The 30-day yield figure described below is calculated according to a
formula prescribed by the SEC. The formula can be expressed as follows:
<TABLE>
<C> <S>
[ (a-b +1) 6-1]
YIELD=2 cd
</TABLE>
<TABLE>
<C> <S> <C> <C>
Where: a = dividends and interest earned during the
period.
b = expenses accrued for the period (net of
reimbursement).
c = the average daily number of shares
outstanding during the
period that were entitled to receive
dividends.
d = the maximum offering price per share on the
last day of the
period.
</TABLE>
For the purpose of determining the interest earned (variable "a" in
the
formula) on debt obligations that were purchased by the Fund at a discount
or
premium, the formula generally calls for amortization of the discount
or
premium; the amortization schedule will be adjusted monthly to reflect
changes
in the market values of the debt obligations.
The Fund's equivalent taxable 30-day yield for a Class of shares is
computed
by dividing that portion of the Class' 30-day yield which is tax-exempt by
one
minus a stated income tax rate and adding the product to that portion, if
any,
of the Class' yield that is not tax-exempt.
The yields on municipal securities are dependent upon a variety of
factors,
including general economic and monetary conditions, conditions of the
municipal
securities market, size of a particular offering, maturity of the
obligation
offered and rating of the issue. Investors should recognize that in periods
of
declining interest rates the Fund's yield for each Class of shares will tend
to
be somewhat higher than prevailing market rates, and in periods of
rising
interest rates the Fund's yield for each Class of shares will tend to
be
somewhat lower. In addition, when interest rates are falling, the inflow of
net
new money to the Fund from the continuous sale of its shares will likely
be
invested in portfolio instruments producing lower yields than the balance of
the
Fund's portfolio, thereby reducing the current yield of the Fund. In periods
of
rising interest rates, the opposite can be expected to occur.
AVERAGE ANNUAL TOTAL RETURN
Average annual total return figures are computed according to a
formula
prescribed by the SEC. The formula can be expressed as follows:
<TABLE>
<S> <C>
P(1 + T)n= ERV
</TABLE>
<TABLE>
<C> <S> <C> <C>
Where: P = a hypothetical initial payment of $1,000.
T = average annual total return.
n = number of years.
ERV = Ending Redeemable Value of a hypothetical
$1,000
investment made at the beginning of a 1-, 5-
or 10-year
period at the end of a 1-, 5- or 10-year
period (or
fractional portion thereof), assuming
reinvestment of all
dividends and distributions.
</TABLE>
21
<PAGE>
AGGREGATE TOTAL RETURN
Aggregate total return figures represent the cumulative change in the value
of
an investment in the Class for the specified period and are computed by
the
following formula:
<TABLE>
<C> <S>
ERV - P
P
</TABLE>
<TABLE>
<C> <S> <C> <C>
Where: P = a hypothetical initial payment of $10,000.
ERV = Ending Redeemable Value of a hypothetical
$10,000
investment made at the beginning of a 1-, 5-
or 10-year
period at the end of a 1-, 5- or 10-year
period (or
fractional portion thereof), assuming
reinvestment of all
dividends and distributions.
</TABLE>
A Class' performance will vary from time to time depending upon
market
conditions, the composition of the Fund's portfolio and operating expenses
and
the expenses exclusively attributable to the Class. Consequently, any
given
performance quotation should not be considered representative of the
Class'
performance for any specified period in the future. Because the performance
will
vary, it may not provide a basis for comparing an investment in the Class
with
certain bank deposits or other investments that pay a fixed yield for a
stated
period of time. Investors comparing a Class' performance with that of
other
mutual funds should give consideration to the quality and maturity of
the
respective investment companies' portfolio securities.
TAXES
As described above and in the Prospectus, the Fund is designed to
provide
investors with current income which is excluded from gross income for
Federal
income tax purposes and exempt from Oregon state personal income taxes. The
Fund
is not intended to constitute a balanced investment program and is not
designed
for investors seeking capital gains or maximum tax-exempt income irrespective
of
fluctuations in principal. Investment in the Fund would not be suitable
for
tax-exempt institutions, qualified retirement plans, H.R. 10 plans
and
individual retirement accounts because such investors would not gain
any
additional tax benefit from the receipt of tax-exempt income.
The following is a summary of selected Federal income tax considerations
that
may affect the Fund and its shareholders. The summary is not intended as
a
substitute for individual tax advice and investors are urged to consult
their
own tax advisors as to the tax consequences of an investment in the Fund.
The Fund expects to qualify and intends to continue to qualify each
year as a
"regulated investment company" under the Code. Provided that the Fund
(a)
qualifies as a regulated investment company and (b) distributes at least 90%
of
its taxable net investment income and net realized short-term capital gains
and
90% of its tax-exempt interest income (reduced by certain expenses), the
Fund
will not be liable for Federal and Oregon state income or franchise taxes to
the
extent its taxable net investment income and its net realized short-
and
long-term capital gains, if any, are distributed to its shareholders. Any
such
taxes paid by the Fund would reduce the amount of income and gains available
for
distribution to shareholders.
Because the Fund will distribute exempt-interest dividends, interest
on
indebtedness incurred by a shareholder to purchase or carry Fund shares is
not
deductible for Federal and Oregon state income tax
22
<PAGE>
purposes. If a shareholder receives exempt-interest dividends with respect
to
any share and if such share is held by the shareholder for six months or
less,
then for Federal and Oregon state income tax purposes, any loss on the sale
or
exchange of such share, to the extent of such exempt-interest dividend, may
be
disallowed. In addition, the Code may require a shareholder, if he or
she
receives exempt-interest dividends, to treat as taxable income a portion
of
certain otherwise non-taxable social security and railroad retirement
benefit
payments. Furthermore, that portion of any exempt-interest dividends paid by
the
Fund which represents income derived from private activity bonds held by
the
Fund may not retain its Federal tax-exempt status in the hands of a
shareholder
who is a "substantial user" of a facility financed by such bonds or a
"related
person" thereof. Similar rules are applicable for Oregon state personal
income
tax purposes. Moreover, as noted in the Fund's Prospectus, (a) some or all
of
the Fund's dividends and distributions may be a specific tax preference item,
or
a component of an adjustment item, for purposes of the Federal individual
and
corporate alternative minimum taxes and (b) the receipt of the Fund's
dividends
and distributions may affect a corporate shareholder's Federal
"environmental"
tax liability. In addition, the receipt of Fund dividends and distributions
may
affect a foreign corporate shareholder's Federal "branch profits" tax
liability
and the Federal and Oregon state "excess net passive income" tax liability of
a
shareholder of a Subchapter S corporation. Shareholders should consult their
own
tax advisors as to whether they are (a) substantial users with respect to
a
facility or related to such users within the meaning of the Code and (b)
subject
to a Federal alternative minimum tax, the Federal environmental tax, the
Federal
branch profits tax or the Federal and Oregon state excess net passive
income
tax.
As described above and in the Fund's Prospectus, the Fund may invest
in
exchange-traded futures contracts and options on futures contracts. The
Fund
anticipates that these investment activities will not prevent the Fund
from
qualifying as a regulated investment company. As a general rule,
these
investment activities will increase or decrease the amount of long-
and
short-term capital gains or losses realized by the Fund and, accordingly,
will
affect the amount of capital gains distributed to the Fund's shareholders.
For Federal and Oregon state income tax purposes, gain or loss on the
futures
contracts and options described above (collectively referred to herein
as
"section 1256 contracts") is taxed pursuant to a special "mark-to-
market
system." Under the mark-to-market system, these instruments are treated as
if
sold at the Fund's fiscal year end for their fair market value. As a result,
the
Fund will be recognizing gains or losses before they are actually realized. As
a
general rule, gain or loss on section 1256 contracts is treated as 60% long-
term
capital gain or loss and 40% short-term capital gain or loss, and
accordingly,
the mark-to-market system generally will affect the amount of capital gains
or
losses taxable to the Fund and the amount of distributions taxable to
a
shareholder. Moreover, if the Fund invests in both section 1256 contracts
and
offsetting positions in such contracts which together constitute a
straddle,
then the Fund may be required to defer certain realized losses. The Fund
expects
that its activities with respect to section 1256 contracts and
offsetting
positions in such contracts will not cause it to be treated as recognizing
a
materially greater amount of capital gains than actually realized and
will
permit it to use substantially all of the losses of the Fund for the
fiscal
years in which such losses actually occur.
While the Fund does not expect to realize a significant amount of
net
long-term capital gains, any such gains realized by the Fund will be
distributed
annually as described in the Prospectus. Such distributions ("capital
gain
dividends") will be taxable to shareholders as long-term capital
gains,
regardless of how long they have held Fund shares, and will be designated
as
capital gain dividends in a written notice mailed to shareholders after
the
close of the Fund's taxable year. If a shareholder receives a capital
gain
dividend with
23
<PAGE>
respect to any share and if the share has been held by the shareholder for
six
months or less, then any loss (to the extent not disallowed pursuant to
the
other six-month rule described above relating to exempt-interest dividends)
on
the sale or exchange of such share will be treated as a long-term capital
loss
to the extent of the capital gain dividend.
If a shareholder incurs a sales charge when acquiring shares of the
Fund,
disposes of those shares within 90 days and then acquires shares in a
mutual
fund for which the otherwise applicable sales charge is reduced by reason of
a
reinvestment right (I.E., exchange privilege), the original sales charge
will
not be taken into account when computing gain/loss on original shares to
the
extent the subsequent sales charge is reduced. Instead, it will be added to
the
tax basis in the newly acquired shares. The portion of the original sales
charge
that does not increase the shareholder's tax basis in the original shares
will
be treated as incurred with respect to the second acquisition and, as a
general
rule, will increase the shareholder's tax basis in the newly acquired
shares.
Furthermore, the same rule also applies to a disposition of the newly
acquired
or redeemed shares made within 90 days of the second acquisition. This
provision
prevents a shareholder from immediately deducting the sales charge by
shifting
his or her investment in a family of mutual funds.
Each shareholder will receive after the close of the calendar year an
annual
statement as to the Federal income tax and Oregon state personal income
tax
status of his or her dividends and distributions from the Fund for the
prior
calendar year. Dividends attributable to Oregon Municipal Securities and
any
other obligations which, when held by an individual, the interest
therefrom
would be exempt from taxation by Oregon, will be exempt from Oregon
state
personal income taxation ("Oregon exempt-interest dividends"). Any
dividends
attributable to interest on municipal obligations that are not Oregon
Municipal
Securities generally will be taxable as ordinary dividends for Oregon
state
personal income tax purposes even if such dividends are excluded from
gross
income for Federal income tax purposes. These statements also will designate
the
amount of exempt-interest dividends that is a specific preference item
for
purposes of the Federal individual and corporate alternative minimum taxes.
Each
shareholder also will receive, if appropriate, various written notices after
the
close of the Fund's prior taxable year as to the Federal income tax status
of
his or her dividends and distributions which were received from the Fund
during
the Fund's prior taxable year. Shareholders should consult their tax advisors
as
to any other state and local taxes that may apply to these dividends
and
distributions. The dollar amount of dividends excluded or exempt from
Federal
income taxation or Oregon state personal income taxation and the dollar
amount
subject to Federal income taxation or Oregon state personal income taxation,
if
any, will vary for each shareholder depending upon the size and duration of
each
shareholder's investment in the Fund. In the event the Fund earns taxable
net
investment income, it intends to designate as taxable dividends the
same
percentage of each day's dividend as its actual taxable net investment
income
bears to its total net investment income earned for the year.
Investors considering buying shares of the Fund just prior to a record
date
for a taxable dividend or capital gain distribution should be aware
that,
regardless of whether the price of the Fund shares to be purchased reflects
the
amount of the forthcoming dividend or distribution payment, any such
payment
will be a taxable dividend or distribution payment.
If a shareholder fails to furnish the Fund with a correct
taxpayer
identification number, fails to fully report dividend or interest income
or
fails to certify to the Fund that he or she has provided a correct
taxpayer
identification number and that he or she is not subject to "backup
withholding,"
then the shareholder may be subject to a 31% backup withholding tax with
respect
to (a) any taxable dividends and
24
<PAGE>
distributions and (b) the proceeds of any redemption of Fund shares.
An
individual's taxpayer identification number is his or her social
security
number. The backup withholding tax is not an additional tax and may be
credited
against a shareholder's regular Federal income tax liability.
The foregoing is only a summary of certain tax considerations
generally
affecting the Fund and its shareholders, and is not intended as a substitute
for
careful tax planning. Further, it should be noted that, for Oregon state
tax
purposes, the portion of any Fund dividends constituting Oregon exempt-
interest
dividends is exempt from income for Oregon state personal income tax
purposes
only. Dividends (including Oregon exempt-interest dividends) paid
to
shareholders subject to Oregon state franchise tax or Oregon state
corporate
income tax may therefore be taxed as ordinary dividends to such
shareholders,
notwithstanding that all or a portion of such dividends is exempt from
Oregon
state personal income tax. Potential shareholders in the Fund, including,
in
particular, corporate shareholders which may be subject to either
Oregon
franchise tax or Oregon corporate income tax, should consult their tax
advisors
with respect to (a) the application of such corporate and franchise taxes to
the
receipt of Fund dividends and as to their own Oregon state tax situation
in
general, (b) the application of other state and local taxes to the receipt
of
Fund dividends and distributions and (c) their own specific tax situations.
CUSTODIAN AND TRANSFER AGENT
Boston Safe, a wholly owned subsidiary of TBC, is located at One Boston
Place,
Boston, Massachusetts 02108, and pursuant to a custody agreement, serves as
the
Fund's custodian. Under the custody agreement, Boston Safe holds the
Fund's
portfolio securities and keeps all necessary accounts and records. For
its
services, Boston Safe receives a monthly fee based upon the month-end
market
value of securities held in custody and also receives certain
securities
transaction charges. The assets of the Fund are held under bank custodianship
in
compliance with the 1940 Act.
TSSG is located at Exchange Place, Boston, Massachusetts 02109, and
pursuant
to a transfer agency agreement, serves as the Fund's transfer agent. Under
the
transfer agency agreement, TSSG maintains the shareholder account records
for
the Fund, handles certain communications between shareholders and the Fund
and
distributes dividends and distributions payable by the Fund. For these
services,
TSSG receives a monthly fee computed on the basis of the number of
shareholder
accounts it maintains for the Fund during the month, and is reimbursed
for
certain out-of-pocket expenses.
ORGANIZATION AND DESCRIPTION OF FUND SHARES
The Fund is a business trust established under the laws of the Commonwealth
of
Massachusetts pursuant to a Master Trust Agreement dated March 10, 1994.
Under Massachusetts law, shareholders could, under certain circumstances,
be
held personally liable for the obligations of the Fund. The Master
Trust
Agreement disclaims shareholder liability for acts or obligations of the
Fund,
however, and requires that notice of such disclaimer be given in each
agreement,
obligation or instrument entered into or executed by the Fund or a Trustee.
The
Master Trust Agreement provides for indemnification from Fund property for
all
losses and expenses of any shareholder held personally liable for
the
obligations of the Fund. Thus, the risk of a shareholder's incurring
financial
loss on account of shareholder liability is limited to circumstances in
which
the Fund itself would be unable to meet
25
<PAGE>
its obligations, a possibility which management of the Fund believes is
remote.
Upon payment of any liability incurred by the Fund, a shareholder paying
such
liability will be entitled to reimbursement from the general assets of the
Fund.
The Trustees intend to conduct the operation of the Fund in such a way so as
to
avoid, as far as possible, ultimate liability of the shareholders
for
liabilities of the Fund.
DESCRIPTION OF SHARES
The Master Trust Agreement of the Fund permits the trustees of the fund to
issue
an unlimited number of full and fractional shares of a single class and
to
divide or combine the shares into a greater or lesser number of shares
without
thereby changing the proportionate beneficial interests in the Fund. Each
share
in the Fund represents an equal proportional interest in the Fund with
each
other share. Shareholders of the Fund are entitled upon its liquidation to
share
pro rata in its net assets available for distribution. No shareholder of
the
Fund has any preemptive or conversion rights. Shares of the Fund are fully
paid
and non-assessable.
Pursuant to the Master Trust Agreement, the Fund's Trustees may authorize
the
creation of additional series of shares (the proceeds of which would be
invested
in separate, independently managed portfolios) and additional classes of
shares
within any series (which would be used to distinguish among the rights
of
different categories of shareholders, as might be required by future
regulations
or other unforeseen circumstances).
VOTING RIGHTS
The shareholders of the Fund are entitled to a full vote for each full
share
held (and a fractional vote for any fractional share held). The Trustees of
the
Fund have the power to alter the number and the terms of office of the
Trustees,
and have terms of unlimited duration (subject to certain removal procedures)
and
may appoint their own successors, provided at least a majority of the
Trustees
at all times have been elected by the shareholders of the Fund. The
voting
rights of the shareholders of the Fund are not cumulative, so that the
holders
of more than 50% of the shares can, if they choose, elect all of the Trustees
of
the Fund; the holders of the remaining shares of the fund would be unable
to
elect any of the Trustees.
FINANCIAL STATEMENT
The Fund's audited financial statement as of [May 10], 1994 accompanies
this
Statement of Additional Information and is incorporated herein by reference
in
its entirety.
26
<PAGE>
APPENDIX
Description of S&P and Moody's ratings:
S&P RATINGS FOR MUNICIPAL BONDS
S&P's Municipal Bond Ratings cover obligations of states and
political
subdivisions. Ratings are assigned to general obligation and revenue
bonds.
General obligation bonds are usually secured by all resources available to
the
municipality and the factors outlined in the rating definitions below
are
weighed in determining the rating. Because revenue bonds in general are
payable
from specifically pledged revenues, the essential element in the security for
a
revenue bond is the quantity and quality of the pledged revenues available
to
pay debt service.
Although an appraisal of most of the same factors that bear on the quality
of
general obligation bond credit is usually appropriate in the rating analysis
of
a revenue bond, other factors are important, including particularly,
the
competitive position of the municipal enterprise under review and the
basic
security covenants. Although a rating reflects S&P's judgment as to the
issuer's
capacity for the timely payment of debt service, in certain instances it
may
also reflect a mechanism or procedure for an assured and prompt cure of
a
default, should one occur, I.E., an insurance program, Federal or
state
guarantee or the automatic withholding and use of state aid to pay the
defaulted
debt service.
AAA
PRIME--These are obligations of the highest quality. They have the
strongest
capacity for timely payment of debt service.
GENERAL OBLIGATION BONDS--In a period of economic stress, the issuers
will
suffer the smallest declines in income and will be least susceptible
to
autonomous decline. Debt burden is moderate. A strong revenue structure
appears
more than adequate to meet future expenditure requirements. Quality
of
management appears superior.
REVENUE BONDS--Debt service coverage has been, and is expected to
remain,
substantial. Stability of the pledged revenues is also exceptionally strong,
due
to the competitive position of the municipal enterprise or to the nature of
the
revenues. Basic security provisions (including rate covenant, earnings test
for
issuance of additional bonds and debt service reserve requirements)
are
rigorous. There is evidence of superior management.
AA
HIGH GRADE--The investment characteristics of general obligation and
revenue
bonds in this group are only slightly less marked than those of the
prime
quality issues. Bonds rated "AA" have the second strongest capacity for
payment
of debt service.
A
GOOD GRADE--Principal and interest payments on bonds in this category
are
regarded as safe. This rating describes the third strongest capacity for
payment
of debt service. It differs from the two higher ratings because:
A-1
<PAGE>
GENERAL OBLIGATION BONDS--There is some weakness, either in the
local
economic base, in debt burden, in the balance between revenues and
expenditures,
or in quality of management. Under certain adverse circumstances, any one
such
weakness might impair the ability of the issuer to meet debt obligations at
some
future date.
REVENUE BONDS--Debt service coverage is good, but not exceptional.
Stability
of the pledged revenues could show some variations because of
increased
competition or economic influences on revenues. Basic security provisions,
while
satisfactory, are less stringent. Management performance appears adequate.
BBB
MEDIUM GRADE--Of the investment grade ratings, this is the lowest.
GENERAL OBLIGATION BONDS--Under certain adverse conditions, several of
the
above factors could contribute to a lesser capacity for payment of debt
service.
The difference between "A" and "BBB" ratings is that the latter shows more
than
one fundamental weakness, or one very substantial fundamental weakness,
whereas
the former shows only one deficiency among the factors considered.
REVENUE BONDS--Debt coverage is only fair. Stability of the pledged
revenues
could show substantial variations, with the revenue flow possibly being
subject
to erosion over time. Basic security provisions are no more than
adequate.
Management performance could be stronger.
BB, B, CCC AND CC
Bonds rated BB, B, CCC and CC are regarded, on balance, as
predominately
speculative with respect to capacity to pay interest and repay principal
in
accordance with the terms of the obligation. BB indicates the lowest degree
of
speculation and CC the highest degree of speculation. While such bonds
will
likely have some quality and protective characteristics, these are outweighed
by
large uncertainties or major risk exposures to adverse conditions.
C
The rating C is reserved for income bonds on which no interest is being paid.
D
Bonds rated D are in default, and payment of interest and/or repayment
of
principal is in arrears.
S&P's letter ratings may be modified by the addition of a plus or a
minus
sign, which is used to show relative standing within the major
rating
categories, except in the AAA-Prime Grade category.
S&P RATINGS FOR MUNICIPAL NOTES
Municipal notes with maturities of three years or less are usually given
note
ratings (designated SP-1, -2 or -3) by S&P to distinguish more clearly
the
credit quality of notes as compared to bonds. Notes rated SP-1 have a
very
strong or strong capacity to pay principal and interest. Those issues
determined
to possess overwhelming safety characteristics are given the designation
of
SP-1+. Notes rated SP-2 have a satisfactory capacity to pay principal
and
interest.
A-2
<PAGE>
MOODY'S RATINGS FOR MUNICIPAL BONDS
AAA
Bonds which are rated Aaa are judged to be of the best quality. They carry
the
smallest degree of investment risk and are generally referred to as "gilt
edge."
Interest payments are protected by a large or by an exceptionally stable
margin
and principal is secure. While the various protective elements are likely
to
change, such changes as can be visualized are most unlikely to impair
the
fundamentally strong position of such issues.
AA
Bonds which are rated Aa are judged to be of high quality by all
standards.
Together with the Aaa group they comprise what are generally known as high
grade
bonds. They are rated lower than the best bonds because margins of
protection
may not be as large as in Aaa securities or fluctuation of protective
elements
may be of greater amplitude or there may be other elements present which
make
the long-term risks appear somewhat larger than in Aaa securities.
A
Bonds which are rated A possess many favorable investment attributes and are
to
be considered as upper medium grade obligations. Factors giving security
to
principal and interest are considered adequate, but elements may be
present
which suggest a susceptibility to impairment sometime in the future.
BAA
Bonds which are rated Baa are considered as medium grade obligations, I.E.,
they
are neither highly protected nor poorly secured. Interest payments and
principal
security appear adequate for the present but certain protective elements may
be
lacking or may be characteristically unreliable over any great length of
time.
Such bonds lack outstanding investment characteristics and in fact
have
speculative characteristics as well.
BA
Bonds which are rated Ba are judged to have speculative elements; their
future
cannot be considered as well assured. Often the protection of interest
and
principal payments may be very moderate and therefore not well
safeguarded
during both good and bad times over the future. Uncertainty of
position
characterizes bonds in this class.
B
Bonds which are rated B generally lack characteristics of the
desirable
investment. Assurance of interest and principal payments or of maintenance
of
other terms of the contract over any long period of time may be small.
CAA
Bonds that are rated Caa are of poor standing. These issues may be in default
or
present elements of danger may exist with respect to principal or interest.
CA
Bonds that are rated Ca represent obligations which are speculative in a
high
degree. These issues are often in default or have other marked shortcomings.
A-3
<PAGE>
C
Bonds that are rated C are the lowest rated class of bonds, and issues so
rated
can be regarded as having extremely poor prospects of ever attaining any
real
investment standing.
Moody's applies the numerical modifiers 1, 2 and 3 in each generic
rating
classification from Aa through Baa. The modifier 1 indicates that the
security
ranks in the higher end of its generic rating category; the modifier 2
indicates
a mid-range ranking; and the modifier 3 indicates that the issue ranks in
the
lower end of its generic rating category.
MOODY'S RATINGS FOR MUNICIPAL NOTES
Moody's ratings for state and municipal notes and other short-term loans
are
designated Moody's Investment Grade ("MIG") and for variable rate
demand
obligations are designated Variable Moody's Investment Grade ("VMIG").
This
distinction is in recognition of the differences between short-term
and
long-term credit risk. Loans bearing the designation MIG 1 or VMIG 1 are of
the
best quality, enjoying strong protection from established cash flows of
funds
for their servicing, from established and broad-based access to the market
for
refinancing or both. Loans bearing the designation MIG 2 or VMIG 2 are of
high
quality, with ample margins of protection although not as large as the
preceding
group. Loans bearing the designation MIG 3 or VMIG 3 are of favorable
quality,
with all security elements accounted for but lacking the undeniable strength
of
the preceding grades. Liquidity and cash flow may be tight and market access
for
refinancing is likely to be less well established.
DESCRIPTION OF S&P A-1+ AND A-1 COMMERCIAL PAPER RATING
The rating A-1+ is the highest, and A-1 the second highest, commercial
paper
rating assigned by S&P. Paper rated A-1+ must have either the direct
credit
support of an issuer or guarantor that possesses excellent long-term
operating
and financial strengths combined with strong liquidity
characteristics
(typically, such issuers or guarantors would display credit
quality
characteristics which would warrant a senior bond rating of "AA-" or higher),
or
the direct credit support of an issuer or guarantor that possesses above-
average
long-term fundamental operating and financing capabilities combined
with
on-going excellent liquidity characteristics. Paper rated A-1 by S&P has
the
following characteristics: liquidity ratios are adequate to meet
cash
requirements; long-term senior debt is rated "A" or better; the issuer
has
access to at least two additional channels of borrowing; basic earnings and
cash
flow have an upward trend with allowance made for unusual
circumstances;
typically, the issuer's industry is well established and the issuer has a
strong
position within the industry; and the reliability and quality of management
are
unquestioned.
DESCRIPTION OF MOODY'S PRIME-1 COMMERCIAL PAPER RATING
The rating Prime-1 is the highest commercial paper rating assigned by
Moody's.
Among the factors considered by Moody's in assigning ratings are the
following:
(a) evaluation of the management of the issuer; (b) economic evaluation of
the
issuer's industry or industries and an appraisal of speculative-type risks
which
may be inherent in certain areas; (c) evaluation of the issuer's products
in
relation to competition and customer acceptance; (d) liquidity; (e) amount
and
quality of long-term debt; (f) trend of earnings over a period of ten years;
(g)
financial strength of a parent company and the relationships which exist
with
the issuer; and (h) recognition by the management of obligations which may
be
present or may arise as a result of public interest questions and
preparations
to meet such obligations.
A-4
<PAGE>
Smith Barney
Shearson
OREGON
MUNICIPALS
FUND
<TABLE>
<S> <C>
STATEMENT OF
ADDITIONAL INFORMATION
[MAY 15,] 1994
</TABLE>
SMITH BARNEY SHEARSON
OREGON MUNICIPALS FUND
Two World Trade Center
SMITH BARNEY SHEARSON OREGON MUNICIPALS FUND
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements
Included in Part A
None
Included in Part B:
To be filed by Amendment
Included in Part C:
To be filed by Amendment
(b) Exhibits
(1) Registrant's Master Trust Agreement dated March 10, 1994 is filed
herein.
(2) Registrant's By-Laws are filed herein.
(3) Inapplicable.
(4) Registrant's form of stock certificate will be filed by amendment.
(5) Investment Advisory Agreement between the Registrant and Greenwich
Street Advisors will be filed by amendment.
(6) Distribution Agreement between the Registrant and Smith Barney
Shearson Inc. will be filed by amendment.
(7) Inapplicable.
(8) Custody Agreement between the Registrant and Boston Safe Deposit
and Trust Company will be filed by amendment.
(9) (a) Sub-Administration Agreement between the Registrant and The
Boston Company Advisors, Inc. will be filed by amendment.
(b) Transfer Agency Agreement between the Registrant and The
Shareholders Services Group, Inc. will be filed by amendment.
(10) Not Applicable.
(11) Consent of Independent Accountants will be filed by amendment.
(12) Inapplicable
(13) Purchase Agreement between the Registrant and Smith Barney
Shearson Inc. will be filed by amendment.
(14) Inapplicable
(15) Shareholder Servicing Plan will be filed by amendment.
(16) Inapplicable
Item 25. Persons Controlled by or Under common Control with Registrant
All of the outstanding shares of beneficial interest of the
Registrant will be owned by Smith Barney Shearson Inc. a Delaware Corporation,
on the effective date of this Registration Statement.
Item 26. Number of Holders of Securities
(1) (2)
Number of Record
Title of Class Holders as of Effective Date
Beneficial Interest
par value $.001 per share One
Item 27. Indemnification
Under Section 6.4 of the Registrant's Master Trust Agreement, any past
or present Trustee or officer of the Registrant, including persons who serve
at the Registrant's request as directors, officers or trustees of another
organization in which the Registrant has any interest as a shareholder,
creditor or otherwise (hereinafter referred to as a "Covered Person") is to be
indemnified to the fullest extent permitted by law against liability and all
expenses reasonable incurred by him in connection with any claim, action, suit
or proceeding to which he may be a party or otherwise involved by reason of
his being or having been a Covered Person of the Registrant and against
amounts paid or incurred by him in the settlement thereof. These provisions
do not authorize indemnification when it is determined, in the manner
specified in the Master Trust Agreement, that a Covered Person has not acted
in good faith in the reasonable belief that his actions were in, or not
opposed to, the best interests of the Registrant. Moreover, this provision
does not authorize indemnification when it is determined, in the manner
specified in the Master Trust Agreement, that the Covered Person would
otherwise be liable to the Registrant or its shareholders by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of his duties
involved in the conduct of his office. Expenses may be paid by the Registrant
in advance of the final disposition of any claim, action, suit or proceeding
upon receipt of an undertaking by a Covered Person to repay those expenses to
the Registrant in the event that it is untimately determined that
indemnification of the expenses is not authorized under the Master Trust
Agreement and the Covered Person either provides security for such undertaking
or insures the Registrant against losses from such advances or the majority of
disinterested Trustees or independent legal counsel determines, in the manner
specified in the Master Trust Agreement, that there is reason to believe the
Covered Person will be entitled to indemnification.
Insofar as indemnification for liability arising under the Securities
Act of 1933, as amended the("Securities Act"), may be permitted to Trustees,
officers and controlling person of the Registrant pursuant to the foregoing
provisions, or otherwise, the Registrant has been advised that in the opinion
of the Securities and Exchange Commission such indemnification is against
public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred or
paid by a Trustee, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
Trustee, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the
matter has been settled by controlling present, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed the Securities Act will be governed by the
final adjudication of such issue.
Item 28(a). Business and Other Connections of Investment Adviser
Investment Adviser - - Greenwich Street Advisors
Greenwich Street Advisors, through its predecessors, has been in the
investment counseling business since 1934 and is a division of Mutual
Management Corp. ("MMC"). MMC was incorporated in 1978 and is a wholly owned
subsidiary of Smith Barney Shearson Holdings Inc. ("Holdings"), which is in
turn a wholly owned subsidiary of The Travelers Inc. (formerly known as
Primerica Corporation) ("Travelers").
The list required by this Item 28 of officers and directors of MMC and
Greenwich Street Advisors, together with information as to any other business,
profession, vocation or employment of a substantial nature engaged in by such
officers and directors during the past two fiscal years, is incorporated by
reference to Schedules A and D of FORM ADV filed by MMC on behalf of Greenwich
Street Advisors pursuant to the Advisers Act (SEC File No. 801-14437).
Prior to the close of business on July 30, 1993 (the "Closing"), Shearson
Lehman Advisors, a member of the Asset Management Group of Shearson Lehman
Brothers Inc. ("Shearson Lehman Brothers"), served as the Registrant's
investment adviser. On the Closing, Travelers and Smith Barney Shearson Inc.
acquired the domestic retail brokerage and asset management business of
Shearson Lehman Brothers, which included the business of the Registrant's
prior investment adviser. Shearson Lehman Brothers was a wholly owned
subsidiary of Shearson Lehman Brothers Holdings Inc. ("Shearson Holdings").
All of the issued and outstanding common stock of Shearson Holdings
(representing 92% of the voting stock) was held by American Express Company.
Information as to any past business vocation or employment of a substantial
nature engaged in by officers and directors of Shearson Lehman Advisors can be
located in Schedules A and D of FORM ADV filed by Shearson Lehman Brothers on
behalf of Shearson Lehman Advisors prior to July 30, 1993. (SEC FILE NO. 801-
3701)
3/15/94
Item 29. Principal Underwriters
Smith Barney Shearson Inc. ("Smith Barney Shearson") currently acts as
distributor for Smith Barney Shearson Managed Municipals Fund Inc., Smith
Barney Shearson New York Municipals Fund Inc., Smith Barney Shearson
California Municipals Fund Inc., Smith Barney Shearson Massachusetts
Municipals Fund, Smith Barney Shearson Global Opportunities Fund, Smith Barney
Shearson Aggressive Growth Fund Inc., Smith Barney Shearson Appreciation Fund
Inc., Smith Barney Shearson Worldwide Prime Assets Fund, Smith Barney
Shearson Short-Term World Income Fund, Smith Barney Shearson Principal Return
Fund, Smith Barney Shearson Municipal Money Market Fund Inc., Smith Barney
Shearson Daily Dividend Fund Inc., Smith Barney Shearson Government and
Agencies Fund Inc., Smith Barney Shearson Managed Governments Fund Inc., Smith
Barney Shearson New York Municipal Money Market Fund, Smith Barney Shearson
California Municipal Money Market Fund, Smith Barney Shearson Income Funds,
Smith Barney Shearson Equity Funds, Smith Barney Shearson Investment Funds
Inc., Smith Barney Shearson Precious Metals and Minerals Fund Inc., Smith
Barney Shearson Telecommunications Trust, Smith Barney Shearson Arizona
Municipals Fund Inc., Smith Barney Shearson New Jersey Municipals Fund Inc.,
The USA High Yield Fund N.V., Garzarelli Sector Analysis Portfolio N.V., The
Advisors Fund L.P., Smith Barney Shearson Fundamental Value Fund Inc., Smith
Barney Shearson Series Fund, The Trust for TRAK Investments, Smith Barney
Shearson Income Trust, Smith Barney Shearson FMA R Trust, Smith Barney
Shearson Adjustable Rate Government Income Fund, Smith Barney Shearson Florida
Municipals Fund, Smith Barney Funds, Inc., Smith Barney Equity Funds, Inc.,
Smith Barney Muni Funds, Smith Barney World Funds, Inc., Smith Barney Money
Funds, Inc., Smith Barney Tax Free Money Fund, Inc., Smith Barney Variable
Account Funds, Smith Barney U.S. Dollar Reserve Fund (Cayman), Worldwide
Special Fund, N.V., Worldwide Securities Limited, (Bermuda), and various
series of unit investment trusts.
Smith Barney Shearson is a wholly owned subsidiary of Smith Barney
Shearson Holdings Inc., which in turn is a wholly owned subsidiary of The
Travelers Inc. (formerly known as Primerica Corporation) ("Travelers"). The
information required by this Item 29 with respect to each director, officer
and partner of Smith Barney Shearson is incorporated by reference to Schedule
A of FORM BD filed by Smith Barney Shearson pursuant to the Securities
Exchange Act of 1934 (SEC File No. 812-8510).
3/08/94
Item 30. Location of Accounts and Records
(1) Smith Barney Shearson Oregon Municipals Fund
Two World Trade Center
New York, New York 10048
(2) The Boston Company Advisors, Inc.
One Boston Place
Boston, Massachusetts 02108
(3) Greenwich Street Advisors
Two World Trade Center
New York, New York 10048
(4) Boston Safe Deposit and Trust Company
One Cabot Road
Medford, Massachusetts 02155
(5) The Shareholder Services Group, Inc.
Exchange Place
Boston, Massachusetts 02109
Item 31. Management Services
Not applicable.
Item 32. Undertakings
(a) The Registrant undertakes to call a meeting of shareholders for the
purpose of voting upon the question of removal of a trustee or trustees of the
Registrant when requested in writing to do so by the holders of at least 10%
of the Registrant's outstanding shares and, in connection with the meeting, to
comply with the provisions of Section 16(c) of the 1940 Act relating to
communications with the shareholders of certain common-law trusts.
(b) The Registrant undertakes to file a post-effective amendment
containing reasonably current financial statements that need not be certified,
within four to six months from the effective date of this Registration
Statement.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, and the
Investment Company Act of 1940, the Registrant, SMITH BARNEY SHEARSON OREGON
MUNICIPALS FUND, has duly caused this Registration Statement to be signed on
its behalf by the undersigned, thereunto duly authorized, all in the City of
Boston, Commonwealth of Massachusetts on the 11th day of March, 1994.
SMITH BARNEY SHEARSON OREGON MUNICIPALS FUND
/s/ Lee D. Augsburger
Lee D. Augsburger,
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Amendment to the Registration Statement and has been signed below by the
following persons in the capacities and on the dates indicated.
Signature Title Date
/s/ Lee D. Augsburger Trustee (Chief Executive Officer)
March 11, 1994
Lee D. Augsburger
/s/ Caren A. Cunningham Trustee
(Chief Financial Officer)
March 11, 1994
Caren A Cunningham
g/shared/domestic/clients/shearson/funds/ore/n1a.doc04:22 PM
EXHIBIT 1
SMITH BARNEY SHEARSON OREGON MUNICIPALS FUND
MASTER TRUST AGREEMENT
MARCH 10, 1994
SMITH BARNEY SHEARSON OREGON MUNICIPALS FUND
MASTER TRUST AGREEMENT
Page
ARTICLE I. NAME AND DEFINITIONS 1
Section 1.1 Name 1
Section 1.2 Definitions 1
a) "Trust" 2
b) "Class" 2
c) "Trustees" 2
d) "Shares" 2
e) "Series" 2
f) "Shareholder" 2
g) "1940 Act" 2
h) "Commission" 2
i) "Declaration of Trust" 2
j) "By-Laws" 2
ARTICLE II. PURPOSE OF TRUST 2
ARTICLE III. THE TRUSTEES 2
Section 3.1 Number, Designation, Election, Term, etc 2
a) Trustees 2
b) Number 3
c) Election and Term 3
d) Resignation and Retirement 3
e) Removal 3
f) Vacancies 3
g) Effect of Death, Resignation, etc 4
h) No Accounting 4
i) Retirement Policy 4
j) Trustees Emeritus 4
i
Page
Section 3.2 Powers of Trustees 4
a) Investments 5
b) Disposition of Assets 5
c) Ownership Powers 5
d) Subscription 6
e) Form of Holding 6
f) Reorganization, etc 6
g) Voting Trusts, etc 6
h) Compromise 6
i) Partnerships, etc 6
j) Borrowing and Security 6
k) Guarantees, etc 6
l) Insurance 6
m) Pensions, etc 7
Section 3.3 Certain Contracts 7
a) Advisory 7
b) Administration 8
c) Distribution 8
d) Custodian and Depository 8
e) Transfer and Dividend Disbursing Agency 8
f) Shareholder Servicing 8
g) Accounting 8
Section 3.4 Payment of Trust Expenses and
Compensation of Trustees 9
Section 3.5 Ownership of Assets of the Trust 9
ARTICLE IV. SHARES 9
Section 4.1 Description of Shares 9
Section 4.2 Establishment and Designation of
Sub-Trusts 11
a) Assets Belonging to Sub-Trusts 11
b) Liabilities Belonging to Sub-Trusts 12
c) Dividends 12
d) Liquidation 13
e) Voting 13
f) Redemption by Shareholder 13
ii
Page
g) Redemption by Trust 14
h) Net Asset Value 14
i) Transfer 14
j) Equality 15
k) Fractions 15
l) Conversion Rights 15
m) Class Differences 15
Section 4.3 Ownership of Shares 15
Section 4.4 Investments in the Trust 15
Section 4.5 No Pre-emptive Rights 16
Section 4.6 Status of Shares and Limitation of
Personal Liability 16
ARTICLE V. SHAREHOLDERS' VOTING POWERS AND
MEETINGS 16
Section 5.1 Voting Powers 16
Section 5.2 Meetings 17
Section 5.3 Record Dates 17
Section 5.4 Quorum and Required Vote 17
Section 5.5 Action by Written Consent 18
Section 5.6 Inspection of Records 18
Section 5.7 Additional Provisions 18
Section 5.8 Shareholder Communications 18
ARTICLE VI. LIMITATION OF LIABILITY; INDEMNIFICATION 18
Section 6.1 Trustees, Shareholders, etc.
Not Personally Liable; Notice 18
iii
Page
Section 6.2 Trustee's Good Faith Action; Expert
Advice; No Bond or Surety 19
Section 6.3 Indemnification of Shareholders 19
Section 6.4 Indemnification of Trustees, Officers, etc 20
Section 6.5 Compromise Payment 20
Section 6.6 Indemnification Not Exclusive, etc 21
Section 6.7 Liability of Third Persons Dealing with
Trustees 21
ARTICLE VII. MISCELLANEOUS 21
Section 7.1 Duration and Termination of Trust 21
Section 7.2 Reorganization 22
Section 7.3 Amendments 22
Section 7.4 Filing of Copies; References; Headings 23
Section 7.5 Applicable Law 23
iv
SMITH BARNEY SHEARSON OREGON MUNICIPALS FUND
MASTER TRUST AGREEMENT
MASTER TRUST AGREEMENT made at Boston, Massachusetts as of this 10th day
of March , 1994, by the Trustees hereunder, and by the holders of shares of
beneficial interest to be issued hereunder as hereinafter provided.
WITNESSETH
WHEREAS this Trust has been formed to carry on the business of an
investment company; and
WHEREAS this Trust is authorized to issue its shares of beneficial
interest in separate series, each separate series to be a Sub-Trust hereunder,
and to issue classes of Shares of any Sub-Trust or divide Shares of any Sub-
Trust into two or more classes, all in accordance with the provisions
hereinafter set forth; and
WHEREAS the Trustees have agreed to manage all property coming into
their hands as trustees of a Massachusetts business trust in accordance with
the provisions hereinafter set forth.
NOW, THEREFORE, the Trustees hereby declare that they will hold all
cash, securities and other assets which they may from time to time acquire in
any manner as Trustees hereunder IN TRUST to manage and dispose of the same
upon the following terms and conditions for the benefit of the holders from
time to time of shares of beneficial interest in this Trust or Sub-Trusts
created hereunder as hereinafter set forth.
ARTICLE I
NAME AND DEFINITIONS
Section 1.1 Name. This Trust shall be known as "Smith Barney Shearson
Oregon Municipals Fund" and the Trustees shall conduct the business of the
Trust under that name or any other name or names as they may from time to time
determine.
Section 1.2 Definitions. Whenever used herein, unless otherwise
required by the context or specifically provided: (a) The "Trust" refers to
the Massachusetts business trust established by this Trust Agreement, as
amended from time to time, inclusive of each and every Sub-Trust established
hereunder;
(b) "Class" refers to any class of Shares of any Series or Sub-
Trust established and designated under or in accordance with the provisions of
Article IV;
(c) "Trustees" refers to the Trustees of the Trust and of each
Sub-Trust hereunder named herein or elected in accordance with Article III;
(d) "Shares" refers to the transferable units of interest into
which the beneficial interest in the Trust and each Sub-Trust of the Trust
and/or any class of any Sub-Trust (as the context may require) shall be
divided from time to time;
(e) "Series" refers to Series of Shares established and
designated under or in accordance with the provisions of Article IV, each of
which Series shall be a Sub-Trust of the Trust;
(f) "Shareholder" means a record owner of Shares;
(g) The "l940 Act" refers to the Investment Company Act of 1940
and the Rules and Regulations thereunder, all as amended from time to time;
(h) The term "Commission" shall have the meaning given it in the
1940 Act;
(i) "Declaration of Trust" shall mean this Master Trust
Agreement, as amended or restated from time to time; and
(j) "By-Laws" shall mean the By-Laws of the Trust as amended
from time to time.
ARTICLE II
PURPOSE OF TRUST
The purpose of the Trust is to operate as an investment company and to
offer Shareholders of the Trust and each Sub-Trust of the Trust one or more
investment programs primarily in securities and debt instruments.
ARTICLE III
THE TRUSTEES
Section 3.1 Number, Designation, Election, Term, etc.
(a) Trustees. The Trustees hereof and of each Sub-Trust
hereunder are Lee D. Augsburger and Caren A. Cunningham.
(b) Number. The Trustees serving as such, whether named above
or hereafter becoming a Trustee, may increase or decrease (to not less than
two) the number of Trustees to a number other than the number theretofore
determined. No decrease in the number of Trustees shall have the effect of
removing any Trustee from office prior to the expiration of his term, but the
number of Trustees may be decreased in conjunction with the removal of a
Trustee pursuant to subsection (e) of this Section 3.1.
(c) Election and Term. The Trustees shall be elected by the
Shareholders of the Trust at the first meeting of Shareholders following the
initial public offering of shares of the Trust. Each Trustee, whether named
above or hereafter becoming a Trustee, shall serve as a Trustee of the Trust
and of each Sub-Trust hereunder during the lifetime of this Trust and until
its termination as hereinafter provided except as such Trustee sooner dies,
resigns or is removed. Subject to Section 16(a) of the 1940 Act, the Trustees
may elect their own successors and may, pursuant to Section 3.1(f) hereof,
appoint Trustees to fill vacancies.
(d) Resignation and Retirement. Any Trustee may resign his
trust or retire as a Trustee, by written instrument signed by him and
delivered to the other Trustees or to any officer of the Trust, and such
resignation or retirement shall take effect upon such delivery or upon such
later date as is specified in such instrument and shall be effective as to the
Trust and each Sub-Trust hereunder.
(e) Removal. Any Trustee may be removed with or without cause
at any time: (i) by written instrument, signed by at least two-thirds of the
number of Trustees prior to such removal, specifying the date upon which such
removal shall become effective; or (ii) by vote of Shareholders holding not
less than two-thirds of the Shares then outstanding, cast in person or by
proxy at any meeting called for the purpose; or (iii) by a written declaration
signed by Shareholders holding not less than two-thirds of the Shares then
outstanding and filed with the Trust's Custodian. Any such removal shall be
effective as to the Trust and each Sub-Trust hereunder.
(f) Vacancies. Any vacancy or anticipated vacancy resulting
from any reason, including without limitation the death, resignation,
retirement, removal or incapacity of any of the Trustees, or resulting from an
increase in the number of Trustees by the other Trustees may (but so long as
there are at least two remaining Trustees, need not unless required by the
1949 Act) be filled by a majority of the remaining Trustees, subject to the
provisions of Section 16(a) of the 1940 Act, through the appointment in
writing of such other person as such remaining Trustees in their discretion
shall determine and such appointment shall be effective upon the written
acceptance of the person named therein to serve as a Trustee and agreement by
such person to be bound by the provisions of this Declaration of Trust, except
that any such appointment in anticipation of a vacancy to occur by reason of
retirement, resignation, or increase in number of Trustees to be effective at
a later date shall become effective only at or after the effective date of
said retirement, resignation, or increase in number of Trustees. As soon as
any Trustee so appointed shall have accepted such appointment and shall have
agreed in writing to be bound by this Declaration of Trust and the appointment
is effective, the Trust estate shall vest in the new Trustee, together with
the continuing Trustees, without any further act or conveyance.
(g) Effect of Death, Resignation, etc. The death, resignation,
retirement, removal, or incapacity of the Trustees, or any one of them, shall
not operate to annul or terminate the Trust or any Sub-Trust hereunder or to
revoke or terminate any existing agency or contract created or entered into
pursuant to the terms of this Declaration of Trust.
(h) No Accounting. Except to the extent required by the 1940
Act or under circumstances which would justify his removal for cause, no
person ceasing to be a Trustee as a result of his death, resignation,
retirement, removal or incapacity (nor the estate of any such person) shall be
required to make an accounting to the Shareholders or remaining Trustees upon
such cessation.
(i) Retirement Policy. Except for those individuals who (a)
were Trustees as of [specify effective date] or (b) were members of the Board
of Directors or Trustees of an investment company having an investment adviser
or principal underwriter under common control with the Trust's investment
adviser or principal underwriter immediately prior to such investment
company's combination with the Trust by merger, acquisition of assets or
similar transaction, and of which Trustees may continue to be nominated as
Trustees and to serve as Trustees if elected or appointed in accordance with
Section 3.1(c) of this Article III, an individual who has reached the age of
seventy-two (72) years may not be elected, re-elected, or appointed to serve
as a Trustee.
(j) Trustees Emeritus. An individual who has served as a
Trustee for a minimum of five years (5) and who retires voluntarily or who may
not stand for re-election because of age may be designated by the remaining
Trustees as a Trustee Emeritus.
An individual designated as a Trustee Emeritus may, upon his or her
request, be permitted to attend meetings of the Trustees and to receive all
materials sent to active Trustees. A Trustee Emeritus shall not have voting
rights at meetings of the Trustees and shall not be under a duty to manage or
direct the business and affairs of the Trust. A Trustee Emeritus shall not be
deemed to stand in a fiduciary relation to the Trust, and shall not be
responsible to discharge the duties of a Trustee or to exercise that
diligence, care or skill which a Trustee would ordinarily be required to
exercise under applicable laws; provided, however, that a Trustee Emeritus may
be held liable to the Trust for any action amounting to bad faith, willful
misconduct or gross negligence, disclosure of any confidential information of
the Trust or appropriation of any opportunity of the Trust.
A stipend, the amount to be determined by the Trustees from time to
time, which shall not exceed the basis upon which active Board Members are
compensated, shall be paid to each Trustee Emeritus. A Trustee Emeritus shall
be indemnified to the full extent that an Officer or Trustee of the Trust may
be indemnified under any provision of this Declaration of Trust or the By-
Laws.
Section 3.2 Powers of Trustees. Subject to the provisions of this
Declaration of Trust, the business of the Trust shall be managed by the
Trustees, and they shall have all powers necessary or convenient to carry out
that responsibility and the purpose of the Trust. Without limiting the
foregoing, the Trustees may adopt By-Laws not inconsistent with this
Declaration of Trust providing for the conduct of the business and affairs of
the Trust and may amend and repeal them to the extent that such By-Laws do not
reserve that right to the Shareholders; they may from time to time in
accordance with the provisions of Section 4.1 hereof establish Sub-Trusts,
each such Sub-Trust to operate as a separate and distinct investment medium
and with separately defined investment objectives and policies and distinct
investment purpose; they may from time to time in accordance with the
provisions of Section 4.1 hereof establish classes of Shares of any Series or
Sub-Trust or divide the Shares of any Series or Sub-Trust into classes; they
may as they consider appropriate elect and remove officers and appoint and
terminate agents and consultants and hire and terminate employees, any one or
more of the foregoing of whom may be a Trustee, and may provide for the
compensation of all of the foregoing; they may appoint from their own number,
and terminate, any one or more committees consisting of two or more Trustees,
including without implied limitation an executive committee, which may, when
the Trustees are not in session and subject to the 1940 Act, exercise some or
all of the power and authority of the Trustees as the Trustees may determine;
in accordance with Section 3.3 they may employ one or more Advisers,
Administrators, Depositories and Custodians and may authorize any Depository
or Custodian to employ subcustodians or agents and to deposit all or any part
of such assets in a system or systems for the central handling of securities
and debt instruments, retain transfer, dividend, accounting or Shareholder
servicing agents or any of the foregoing, provide for the distribution of
Shares by the Trust through one or more distributors, principal underwriters
or otherwise, set record dates or times for the determination of Shareholders
or various of them with respect to various matters; they may compensate or
provide for the compensation of the Trustees, officers, advisers,
administrators, custodians, other agents, consultants and employees of the
Trust or the Trustees on such terms as they deem appropriate; and in general
they may delegate to any officer of the Trust, to any committee of the
Trustees and to any employee, adviser, administrator, distributor, depository,
custodian, transfer and dividend disbursing agent, or any other agent or
consultant of the Trust such authority, powers, functions and duties as they
consider desirable or appropriate for the conduct of the business and affairs
of the Trust, including without implied limitation the power and authority to
act in the name of the Trust and of the Trustees, to sign documents and to act
as attorney-in-fact for the Trustees.
Without limiting the foregoing and to the extent not inconsistent with
the 1940 Act or other applicable law, the Trustees shall have power and
authority for and on behalf of the Trust and each separate Sub-Trust
established hereunder:
(a) Investments. To invest and reinvest cash and other
property, and to hold cash or other property uninvested without in any event
being bound or limited by any present or future law or custom in regard to
investments by trustees;
(b) Disposition of Assets. To sell, exchange, lend, pledge,
mortgage, hypothecate, write options on and lease any or all of the assets of
the Trust;
(c) Ownership Powers. To vote or give assent, or exercise any
rights of ownership, with respect to stock or other securities, debt
instruments or property; and to execute and deliver proxies or powers of
attorney to such person or persons as the Trustees shall deem proper, granting
to such person or persons such power and discretion with relation to
securities, debt instruments or property as the Trustees shall deem proper;
(d) Subscription. To exercise powers and rights of subscription
or otherwise which in any manner arise out of ownership of securities or debt
instruments;
(e) Form of Holding. To hold any security, debt instrument or
property in a form not indicating any trust, whether in bearer, unregistered
or other negotiable form, or in the name of the Trustees or of the Trust or of
any Sub-Trust or in the name of a custodian, subcustodian or other depository
or a nominee or nominees or otherwise;
(f) Reorganization, etc. To consent to or participate in any
plan for the reorganization, consolidation or merger of any corporation or
issuer, any security or debt instrument of which is or was held in the Trust;
to consent to any contract, lease, mortgage, purchase or sale of property by
such corporation or issuer, and to pay calls or subscriptions with respect to
any security or debt instrument held in the Trust;
(g) Voting Trusts, etc. To join with other holders of any
securities or debt instruments in acting through a committee, depositary,
voting trustee or otherwise, and in that connection to deposit any security or
debt instrument with, or transfer any security or debt instrument to, any such
committee, depositary or trustee, and to delegate to them such power and
authority with relation to any security or debt instrument (whether or not so
deposited or transferred) as the Trustees shall deem proper, and to agree to
pay, and to pay, such portion of the expenses and compensation of such
committee, depositary or trustee as the Trustees shall deem proper;
(h) Compromise. To compromise, arbitrate or otherwise adjust
claims in favor of or against the Trust or any Sub-Trust or any matter in
controversy, including but not limited to claims for taxes;
(i) Partnerships, etc. To enter into joint ventures, general or
limited partnerships and any other combinations or associations;
(j) Borrowing and Security. To borrow funds and to mortgage and
pledge the assets of the Trust or any part thereof to secure obligations
arising in connection with such borrowing;
(k) Guarantees, etc. To endorse or guarantee the payment of any
notes or other obligations of any person; to make contracts of guaranty or
suretyship, or otherwise assume liability for payment thereof; and to mortgage
and pledge the Trust property or any part thereof to secure any of or all such
obligations;
(l) Insurance. To purchase and pay for entirely out of Trust
property such insurance as they may deem necessary or appropriate for the
conduct of the business, including, without limitation, insurance policies
insuring the assets of the Trust and payment of distributions and principal on
its portfolio investments,' and insurance policies insuring the Shareholders,
Trustees, officers, employees, agents, consultants, investment advisers,
managers, administrators, distributors, principal underwriters, or independent
contractors, or any thereof (or any person connected therewith), of the Trust
individually against all claims and liabilities of every nature arising by
reason of holding, being or having held any such office or position, or by
reason of any action alleged to have been taken or omitted by any such person
in any such capacity, including any action taken or omitted that may be
determined to constitute negligence, whether or not the Trust would have the
power to indemnify such person against such liability; and
(m) Pensions, etc. To pay pensions for faithful service, as
deemed appropriate by the Trustees, and to adopt, establish and carry out
pension, profit-sharing, share bonus, share purchase, savings, thrift and
other retirement, incentive and benefit plans, trust and provisions, including
the purchasing of life insurance and annuity contracts as a means of providing
such retirement and other benefits, for any or all of the Trustees, officers,
employees and agents of the Trust.
Except as otherwise provided by the 1940 Act or other applicable law,
this Declaration of Trust or the By-Laws, any action to be taken by the
Trustees on behalf of the Trust or any Sub-Trust may be taken by a majority of
the Trustees present at a meeting of Trustees (a quorum, consisting of at
least a majority of the Trustees then in office, being present), within or
without Massachusetts, including any meeting held by means of a conference
telephone or other communications equipment by means of which all persons
participating in the meeting can hear each other at the same time and
participation by such means shall constitute presence in person at a meeting,
or by written consents of a majority of the Trustees then in office (or such
larger or different number as may be required by the 1940 Act or other
applicable law).
Section 3.3 Certain Contracts. Subject to compliance with the
provisions of the 1940 Act, but notwithstanding any limitations of present and
future law or custom in regard to delegation of powers by trustees generally,
the Trustees may, at any time and from time to time and without limiting the
generality of their powers and authority otherwise set forth herein, enter
into one or more contracts with any one or more corporations, trusts,
associations, partnerships, limited partnerships, other types of
organizations, or individuals ("Contracting Party"), to provide for the
performance and assumption of some or all of the following services, duties
and responsibilities to, for or on behalf of the Trust and/or any Sub-Trust,
and/or the Trustees, and to provide for the performance and assumption of such
other services, duties and responsibilities in addition to those set forth
below as the Trustees may determine appropriate:
(a) Advisory. Subject to the general supervision of the
Trustees and in conformity with the stated policy of the Trustees with respect
to the investments of the Trust or of the assets belonging to any Sub-Trust of
the Trust (as that phrase is defined in subsection (a) of Section 4.2), to
manage such investments and assets, make investment decisions with respect
thereto, and to place purchase and sale orders for portfolio transactions
relating to such investments and assets;
(b) Administration. Subject to the general supervision of the
Trustees and in conformity with any policies of the Trustees with respect to
the operations of the Trust and each Sub-Trust (including each class thereof),
to supervise all or any part of the operations of the Trust and each Sub-
Trust, and to provide all or any part of the administrative and clerical
personnel, office space and office equipment and services appropriate for the
efficient administration and operations of the Trust and each Sub-Trust;
(c) Distribution To distribute the Shares of the Trust and
each Sub-Trust (including any classes thereof), to be principal underwriter of
such Shares, and/or to act as agent of the Trust and each Sub-Trust in the
sale of Shares and the acceptance or rejection of orders for the purchase of
Shares;
(d) Custodian and Depository. To act as depository for and to
maintain custody of the property of the Trust and each Sub-Trust and
accounting records in connection therewith;
(e) Transfer and Dividend Disbursing Agency. To maintain
records of the ownership of outstanding Shares, the issuance and redemption
and the transfer thereof, and to disburse any dividends declared by the
Trustees and in accordance with the policies of the Trustees and/or the
instructions of any particular Shareholder to reinvest any such dividends;
(f) Shareholder Servicing. To provide service with respect to
the relationship of the Trust and its Shareholders, records with respect to
Shareholders and their Shares, and similar matters; and
(g) Accounting. To handle all or any part of the accounting
responsibilities, whether with respect to the Trust's properties, Shareholders
or otherwise.
The same person may be the Contracting Party for some or all of the services,
duties and responsibilities to, for and of the Trust and/or the Trustees, and
the contracts with respect thereto may contain such terms interpretive of or
in addition to the delineation of the services, duties and responsibilities
provided for, including provisions that are not inconsistent with the 1940 Act
relating to the standard of duty of and the rights to indemnification of the
Contracting Party and others, as the Trustees may determine. Nothing herein
shall preclude, prevent or limit the Trust or a Contracting Party from
entering into sub-contractual arrangements relative to any of the matters
referred to in Sections 3.3(a) through (g) hereof.
The fact that:
(i) any of the Shareholders, Trustees, or officers of the Trust
is a shareholder, director, officer, partner, trustee, employee, manager,
adviser, principal underwriter or distributor or agent of or for any
Contracting Party, or of or for any parent or affiliate of any Contracting
Party or that the Contracting Party or any parent or affiliate thereof is a
Shareholder or has an interest in the Trust or any Sub-Trust, or that
(ii) any Contracting Party may have a contract providing for the
rendering of any similar services to one or more other corporations, trusts,
associations, partnerships, limited partnerships or other organizations, or
have other business or interests,
shall not affect the validity of any contract for the performance and
assumption of services, duties and responsibilities to, for or of the Trust or
any Sub-Trust and/or the Trustees or disqualify any Shareholder, Trustee or
officer of the Trust from voting upon or executing the same or Create any
liability or accountability to the Trust, any Sub-Trust or its Shareholders,
provided that in the case of any relationship or interest referred to in the
preceding clause (i) on the part of any Trustee or officer of the Trust either
(x) the material facts as to such relationship or interest have been disclosed
to or are known by the Trustees not having any such relationship or interest
and the contract involved is approved in good faith by a majority of such
Trustees not having any such relationship or interest (even though such
unrelated or disinterested Trustees are less than a quorum of all of the
Trustees), (y) the material facts as to such relationship or interest and as
to the contract have been disclosed to or are known by the Shareholders
entitled to vote thereon and the contract involved is specifically approved in
good faith by vote of the Shareholders, or (z) the specific contract involved
is fair to the Trust as of the time it is authorized, approved or ratified by
the Trustees or by the Shareholders.
Section 3.4 Payment of Trust Expenses and Compensation of Trustees. The
Trustees are authorized to pay or to cause to be paid out of the principal or
income of the Trust or any Sub-Trust, or partly out of principal and partly
out of income, and to charge or allocate the same to, between or among such
one or more of the Sub-Trusts and/or one or more classes of Shares thereof
that may be established and designated pursuant to Article IV, as the Trustees
deem fair, all expenses, fees, charges, taxes and liabilities incurred or
arising in connection with the Trust, any Sub-Trust and/or any class of Shares
thereof, or in connection with the management thereof, including, but not
limited to, the Trustees' compensation and such expenses and charges for the
services of the Trust's officers, employees, investment adviser,
administrator, distributor, principal underwriter, auditor, counsel,
depository, custodian, transfer agent, dividend disbursing agent, accounting
agent, Shareholder servicing agent, and such other agents, consultants, and
independent contractors and such other expenses and charges as the Trustees
may deem necessary or proper to incur. Without limiting the generality of any
other provision hereof, the Trustee shall be entitled to reasonable
compensation from the Trust for their services as Trustees and may fix the
amount of such compensation.
Section 3.5 Ownership of Assets of the Trust. Title to all of the
assets of the Trust shall at all times be considered as vested in the
Trustees.
ARTICLE IV
SHARES
Section 4.1 Description of Shares. The beneficial interest in the Trust
shall be divided into Shares, all with $.001 par value, but the Trustees shall
have the authority from time to time to issue Shares in one or more Series
(each of which Series of Shares shall represent the beneficial interest in a
separate and distinct Sub-Trust of the Trust, including without limitation
each Sub-Trust specifically established and designated in Section 4.2), as
they deem necessary or desirable. For all purposes under this Declaration of
Trust or otherwise, including, without implied limitation, (i) with respect t?
the rights of creditors and (ii) for purposes of interpreting the relevant
rights of each Sub-Trust and the Shareholders of each Sub-Trust, each Sub-
Trust established hereunder shall be deemed to be a separate trust. The
Trustees shall have exclusive power without the requirement of Shareholder
approval to establish and designate such separate and distinct Sub-Trusts, and
to fix and determine the relative rights and preferences as between the shares
of the separate Sub-Trusts as to right of redemption and the price, terms and
manner of redemption, special and relative rights as to dividends and other
distributions and on Iiquidation, sinking or purchase fund provisions,
conversion rights, and conditions under which the several Sub-Trusts shall
have separate voting rights or no voting rights.
In addition, the Trustees shall have exclusive power, without the
requirement of Shareholder approval, to issue classes of Shares of any Sub-
Trust or divide the Shares of any Sub-Trust into classes, each class having
such different dividend, liquidation, voting and other rights as the Trustees
may determine, and may establish and designate the specific classes of Shares
of each Sub-Trust The fact that a Sub-Trust shall have initially been
established and designated without any specific establishment or designation
of classes (i.e., that all Shares of such Sub-Trust are initially of a single
class), or that a Sub-Trust shall have more than one established and
designated class, shall not limit the authority of the Trustees to establish
and designate separate classes, or one or more further classes, of said Sub-
Trust without approval of the holders of the initial class thereof, or
previously established and designated class or classes thereof, provided that
the establishment and designation of such further separate classes would not
adversely affect the rights of the holders of the initial or previously
established and designated class or classes (within the meaning of section 77
of the Massachusetts General Laws Chapter 156B).
The number of authorized Shares and the number of Shares of each Sub-
Trust or class thereof that may be issued is unlimited, and the Trustees may
issue Shares of any Sub-Trust or class thereof for such consideration and on
such terms as they may determine (or for no consideration if pursuant to a
Share dividend or split-up), all without action or approval of the
Shareholders. All Shares when so issued on the terms determined by the
Trustees shall be fully paid and non-assessable (but may be subject to
mandatory contribution back to the Trust as provided in subsection (h) of
Section 4.2). The Trustees may classify or reclassify any unissued Shares or
any Shares previously issued and reacquired of any Sub-Trust or class thereof
into one or more Sub-Trusts or Classes thereof that may be established and
designated from time to time. The Trustees may hold as treasury Shares,
reissue for such consideration and on such terms as they may determine, or
cancel, at their discretion from time to time, any Shares of any Sub-Trust or
class thereof reacquired by the Trust
The Trustees may from time to time close the transfer books or establish
record dates and times for the purposes of determining the holders of Shares
entitled to be treated as such, to the extent provided or referred to in
Section 5.3
The establishment and designation of any Sub-Trust or of any class of
Shares of any Sub-Trust in addition to those established and designated in
Section 4.2 shall be effective (i) upon the execution by a majority of the
then Trustees of an instrument setting forth such establishment and
designation of the relative rights and preferences of the Shares of such Sub-
Trust or class, (ii) upon the execution of an instrument in writing by an
officer of the Trust pursuant to the vote of a majority of the Trustees, or
(iii) as otherwise provided in either such instrument. At any time that there
are no Shares outstanding of any particular Sub-Trust or class previously
established and designated, the Trustees may by an instrument executed by a
majority of their number (or by an instrument executed by an officer of the
Trust pursuant to the vote of a majority of the Trustees) abolish that Sub-
Trust or class and the establishment and designation thereof. Each instrument
establishing and designating any Sub-Trust shall have the status of an
amendment to this Declaration of Trust.
Any Trustee, officer or other agent of the Trust, and any organization
in which any such person is interested may acquire, own, hold and dispose of
Shares of any Sub-Trust (including any classes thereof) of the Trust to the
same extent as if such person were not a Trustee, officer or other agent of
the Trust; and the Trust may issue and sell or cause to be issued and sold and
may purchase Shares of any Sub-Trust (including any classes thereof) from any
such person or any such organization subject only to the general limitations,
restrictions or other provisions applicable to the sale or purchase of Shares
of such Sub-Trust (including any classes thereof) generally.
Section 4.2 Establishment and Designation of Sub-Trusts. Without
limiting the authority of the Trustees set forth in Section 4.1 to establish
and designate any further Sub-Trusts and classes, the Trustees hereby
establish and designate the following Sub-Trusts and classes thereof: "Smith
Barney Shearson Oregon Municipals Fund" each of which shall consist of Class
A, B, C, and D. The Shares of such Sub-Trusts and classes thereof and any
Shares of any further Sub-Trusts or classes that may from time to time be
established and designated by the Trustees shall (unless the Trustees
otherwise determine with respect to some further Sub-Trust or class at the
time of establishing and designating the same) have the following relative
rights and preferences:
(a) Assets Belonging to Sub-Trusts. All consideration received
by the Trust for the issue or sale of Shares of a particular Sub-Trust or any
classes thereof, together with all assets in which such consideration is
invested or reinvested, all income, earnings, profits, and proceeds thereof,
including any proceeds derived from the sale, exchange or liquidation of such
assets, and any funds or payments derived from any reinvestment of such
proceeds in whatever form the same may be, shall be held by the Trustees in
trust for the benefit of the holders of Shares of that Sub-Trust or class
thereof and shall irrevocably belong to that Sub-Trust (and be allocable to
any classes thereof) for all purposes, and shall be so recorded upon the books
of account of the Trust. Such consideration, assets, income, earnings,
profits, anal proceeds thereof, including any proceeds derived from the sale,
exchange or liquidation of such assets, and any funds or payments derived from
any reinvestment of such proceeds, in whatever form the same may be, together
with any General Items allocated to that Sub-Trust as provided in the
following sentence, are herein referred to as "assets belonging to" that Sub-
Trust (and allocable to any classes thereof). In the event that there are any
assets, income, earnings, profits, and proceeds thereof, funds, or payments
which are not readily identifiable as belonging to any particular Sub-Trust
(collectively "General Items"), the Trustees shall allocate such General Items
to and among any one or more of the Sub-Trusts established and designated from
time to time in such manner and on such basis as they, in their sole
discretion, deem fair and equitable; and any General Items so allocated to a
particular Sub-Trust shall belong to that Sub-Trust (and be allocable to any
classes thereof). Each such allocation by the Trustees shall be conclusive
and binding upon the Shareholders of all Sub-Trusts (including any classes
thereof) for all purposes.
(b) Liabilities Belonging to Sub-Trusts. The assets belonging
to each particular Sub-Trust shall be charged with the liabilities in respect
of that Sub-Trust and all expenses, costs, charges and reserves attributable
to that Sub-Trust, and any general liabilities, expenses, costs, charges or
reserves of the Trust which are not readily identifiable as belonging to any
particular Sub-Trust shall be allocated and charged by the Trustees to and
among any one or more of the Sub-Trusts established and designated from time
to time in such manner and on such basis as the Trustees in their sole
discretion deem fair and equitable. In addition, the liabilities in respect
of a particular class of Shares of a particular Sub-Trust and all expenses,
costs, charges and reserves belonging to that class of Shares, and any general
liabilities, expenses, costs, charges or reserves of that particular Sub-Trust
which are not readily identifiable as belonging to any particular class of
Shares of that Sub-Trust shall be allocated and charged by the Trustees to and
among any one or more of the classes of Shares of that Sub-Trust established
and designated from time to time in such manner and on such basis as the
Trustees in their sole discretion deem fair and equitable. The liabilities,
expenses, costs, charges and reserves allocated and so charged to a Sub-Trust
or class thereof are herein referred to as "liabilities belonging to" that
Sub-Trust or class thereof. Each allocation of liabilities, expenses, costs,
charges and reserves by the Trustees shall be conclusive and binding upon the
Shareholders, creditors and any other persons dealing with the Trust or any
Sub-Trust (including any classes thereof) for all purposes. Any creditor of
any Sub-Trust may look only to the assets of that Sub-Trust to satisfy such
creditor's debt.
The Trustees shall have full discretion, to the extent not inconsistent
with the 1940 Act, to determine which items shall be treated as income and
which items as capital; and each such determination and allocation shall be
conclusive and binding upon the Shareholders.
(c) Dividends. Dividends and distributions on Shares of a
particular Sub-Trust or any class thereof may be paid with such frequency as
the Trustees may determine, which may be daily or otherwise pursuant to a
standing resolution or resolutions adopted only once or with such frequency as
the Trustees may determine, to the holders of Shares of that Sub-Trust or
class, from such of the income and capital gains, accrued or realized, from
the assets belonging to that Sub-Trust, or in the case of a class, belonging
to that Sub-Trust and allocable to that class, as the Trustees may determine,
after providing for actual and accrued liabilities belonging to that Sub-Trust
or class. All dividends and distributions on Shares of a particular Sub-Trust
or class thereof shall be distributed pro rata to the holders of Shares of
that Sub-Trust or class in proportion to the number of Shares of that Sub-
Trust or class held by such holders at the date and time of record established
for the payment of such dividends or distributions, except that in connection
with any dividend or distribution program or procedure the Trustees may
determine that no dividend or distribution shall be payable on Shares as to
which the Shareholder's purchase order and/or payment have not been received
by the time or times established by the Trustees under such program or
procedure. Such dividends and distributions may be made in cash or Shares of
that Sub-Trust or class or a combination thereof as determined by the Trustees
or pursuant to any program that the Trustees may have in effect at the time
for the election by each Shareholder of the mode of the making of such
dividend or distribution to that Shareholder. Any such dividend or
distribution paid in Shares will be paid at the net asset value thereof as
determined in accordance with subsection (h) of Section 4.2.
(d) Liquidation. In the event of the liquidation or dissolution
of the Trust, the Shareholders of each Sub-Trust or any class thereof that has
been established and designated shall be entitled to receive, when and as
declared by the Trustees, the excess of the assets belonging to that Sub-
Trust, or in the case of a class, belonging to that Sub-Trust and allocable to
that class, over the liabilities belonging to that Sub-Trust or class. The
assets so distributable to the Shareholders of any particular Sub-Trust or
class thereof shall be distributed among such Shareholders in proportion to
the number of Shares of that Sub-Trust or class thereof held by them and
recorded on the books of the Trust. The liquidation of any particular Sub-
Trust or class thereof may be authorized by vote of a majority of the Trustees
then in office subject to the approval of a majority of the outstanding voting
Shares of that Sub-Trust, as defined in the l940 Act.
(e) Voting. On each matter submitted to a vote of the
Shareholders, each holder of a Share of each Sub-Trust or class thereof shall
be entitled to one vote for each whole Share and to a proportionate fractional
vote for each fractional Share standing in his name on the books of the Trust.
The Trustees shall cause each matter required or permitted to be voted upon at
a meeting or by written consent of Shareholders to be submitted to a vote of
all Sub-Trusts and classes thereof entitled to vote thereon (irrespective of
class), unless the 1940 Act or other applicable laws or regulations require
that the actions of the Shareholders be taken by a separate vote of one or
more Sub-Trusts or classes thereof, or the Trustees determine that any matter
to be submitted to a vote of Shareholders affects only the rights or interests
of one or more (but not all) Sub-Trusts or classes thereof, in which case only
the Shareholders of the Sub-Trust or Sub-Trusts or class or classes so
affected shall be entitled to vote thereon.
(f) Redemption by Shareholder. Each holder of Shares of a
particular Sub-Trust or any class thereof shall have the right at such times
as may be permitted by the Trust, but no less frequently than once each week,
to require the Trust to redeem all or any part of his Shares of that Sub-Trust
or class thereof at a redemption price equal to the net asset value per Share
of that Sub-Trust or class thereof next determined in accordance with
subsection (h) of this Section 4.2 after the Shares are properly tendered for
redemption. Payment of the redemption price shall be in cash; provided,
however, that if the Trustees determine, which determination shall be
conclusive, that conditions exist which make payment wholly in cash unwise or
undesirable, the Trust may make payment wholly or partly in securities or
other assets belonging to the Sub-Trust of which the Shares being redeemed are
part at the value of such securities or assets used in such determination of
net asset value.
Notwithstanding the foregoing, the Trust may postpone payment of the
redemption price and may suspend the right of the holders of Shares of any
Sub-Trust or class thereof to require the Trust to redeem Shares of that Sub-
Trust during any period or at any time when and to the extent permissible
under the 1940 Act.
(g) Redemption by Trust. Each Share of each Sub-Trust or class
thereof that has been established and designated is subject to redemption by
the Trust at the redemption price which would be applicable if such Share was
then being redeemed by the Shareholder pursuant to subsection (f) of this
Section 4.2: (a) at any time, if the Trustees determine in their sole
discretion that failure to so redeem may have materially adverse consequences
to the holders of the Shares of the Trust or any Sub-Trust thereof or class
thereof, or (b) upon such other conditions as may from time to time be
determined by the Trustees and set forth in the then current Prospectus of the
Trust with respect to maintenance of Shareholder accounts of a minimum amount.
Upon such redemption the holders of the Shares so redeemed shall have no
further right with respect thereto other than to receive payment of such
redemption price.
(h) Net Asset Value. The net asset value per Share of any Sub-
Trust shall be (i) in the case of a Sub-Trust whose Shares are not divided
into classes, the quotient obtained by dividing the value of the net assets of
that Sub-Trust (being the value of the assets belonging to that Sub-Trust less
the liabilities belonging to that Sub-Trust) by the total number of Shares of
that Sub-Trust outstanding, and (ii) in the case of a class of Shares of a
Sub-Trust whose Shares are divided into classes, the quotient obtained by
dividing the value of the net assets of that Sub-Trust allocable to such class
(being the value of the assets belonging to that Sub-Trust allocable to such
class less the liabilities belonging to such class) by the total number of
Shares of such class outstanding; all determined in accordance with the
methods and procedures, including without limitation those with respect to
rounding, established by the Trustees from time to time.
The Trustees may determine to maintain the net asset value per Share of
any Sub-Trust at a designated constant dollar amount and in connection
therewith may adopt procedures not inconsistent with the 1940 Act for the
continuing declarations of income attributable to that Sub-Trust as dividends
payable in additional Shares of that Sub-Trust at the designated constant
dollar amount and for the handling of any losses attributable to that Sub-
Trust. Such procedures may provide that in the event of any loss each
Shareholder shall be deemed to have contributed to the capital of the Trust
attributable to that Sub-Trust his pro rata portion of the total number of
Shares required to be cancel led in order to permit the net asset value per
Share of that Sub-Trust to be maintained, after reflecting such loss, at the
designated constant dollar amount. Each Shareholder of the Trust shall be
deemed to have agreed, by his investment in any Sub-Trust with respect to
which the Trustees shall have adopted any such procedure, to make the
contribution referred to in the preceding sentence in the event of any such
loss.
(i) Transfer. All Shares of each particular Sub-Trust or class
thereof shall be transferable, but transfers of Shares of a particular Sub-
Trust or class thereof will be recorded on the Share transfer records of the
Trust applicable to that Sub-Trust or class only at such times as Shareholders
shall have the right to require the Trust to redeem Shares of that Sub-Trust
or class and at such other times as may be permitted by the Trustees.
(j) Equality. Except as provided herein or in the instrument
designating and establishing any class of Shares or any Sub-Trust, all Shares
of each particular Sub-Trust or class thereof shall represent an equal
proportionate interest in the assets belonging to that Sub-Trust, or in the
case of a class, belonging to that Sub-Trust and allocable to that class,
subject to the liabilities belonging to that Sub-Trust or class, and each
Share of any particular Sub-Trust or class shall be equal to each other Share
of that Sub-Trust or class; but the provisions of this sentence shall not
restrict any distinctions permissible under subsection (c) of this Section 4.2
that may exist with respect to dividends and distributions on Shares of the
same S ~b-Trust or class. The Trustees may from time to time divide or
combine the Shares of any particular Sub-Trust or class into a greater or
lesser number of Shares of that Sub-Trust or class without thereby changing
the proportionate beneficial interest in the assets belonging to that Sub-
Trust or class or in any way affecting the rights of Shares of any other Sub-
Trust or class.
(k) Fractions. Any fractional Share of any Sub-Trust or class,
if any such fractional Share is outstanding, shall carry proportionately all
the rights and obligations of a whole Share of that Sub-Trust Or class,
including rights and obligations with respect to voting, receipt of dividends
and distributions, redemption of Shares, and liquidation of the Trust.
(l) Conversion Rights. Subject to compliance with the
requirements of the 1940 Act, the Trustees shall have the authority to provide
that holders of Shares of any Sub-Trust or class thereof shall have the right
to convert said Shares into Shares of one or more other Sub-Trust or class
thereof in accordance with such requirements and procedures as may be
established by the Trustees.
(m) Class Differences. The relative rights and preferences of
the classes of any Sub-Trust may differ in such other respects as the Trustees
may determine to be appropriate in their sole discretion, provided that such
differences are set forth in the instrument establishing and designating such
classes and executed by a majority of the Trustees (or by an instrument
executed by an officer of the Trust pursuant to a vote of a majority of the
Trustees).
Section 4.3 Ownership of Shares. The ownership of Shares shall be
recorded on the books of the Trust or of a transfer or similar agent for the
Trust, which books shall be maintained separately for the Shares of each Sub-
Trust and each class thereof that has been established and designated. No
certificates certifying the ownership of Shares need be issued except as the
Trustees may otherwise determine from time to time. The Trustees may make
such rules as they consider appropriate for the issuance of Shares
certificates, the use of facsimile signatures, the transfer of Shares and
similar matters. The record books of the Trust as kept by the Trust or any
transfer or similar agent, as the case may be, shall be conclusive as to who
are the Shareholders and as to the number of Shares of each Sub-Trust and
class thereof held from time to time by each such Shareholder.
Section 4.4 Investments in the Trust. The Trustees may accept
investments in the Trust and each Sub-Trust thereof from such persons and on
such terms and for such consideration, not inconsistent with the provisions of
the 1940 Act, as they from time to time authorize. The Trustees may authorize
any distributor, principal underwriter, custodian, transfer agent or other
person to accept orders for the purchase of Shares that conform to such
authorized terms and to reject any purchase orders for Shares whether or not
conforming to such authorized terms.
Section 4.5 No Pre-emptive Rights. Shareholders shall have no pre-
emptive or other right to subscribe to any additional Shares or other
securities issued by the Trust.
Section 4.6 Status of Shares and Limitation of Personal Liability.
Shares shall be deemed to be personal property giving only the rights provided
in this instrument. Every Shareholder by virtue of having become a
Shareholder shall be held to have expressly assented and agreed to the terms
hereof and to have become a party hereto. The death of a Shareholder during
the continuance of the Trust shall not operate to terminate the Trust or any
Sub-Trust thereof nor entitle the representative of any deceased Shareholder
to an accounting or to take any action in court or elsewhere against the Trust
or the Trustees, but only to the rights of said decedent under this Trust.
Ownership of Shares shall not entitle the Shareholder to any title in or to
the whole or any part of the Trust property or right to call for a partition
or division of the same or for an accounting, nor shall the ownership of
Shares constitute the Shareholders partners. Neither the Trust nor the
Trustees, nor any officer, employee or agent of the Trust shall have any power
to bind personally any Shareholder, nor except as specifically provided herein
to call upon any Shareholder for the payment of any sum of money or assessment
whatsoever other than such as the Shareholder may at any time personally agree
to pay.
ARTICLE V
SHAREHOLDERS' VOTING POWERS AND MEETINGS
Section 5.1 Voting Powers. The Shareholders shall have power to vote
only (i) for the election or removal of Trustees as provided in Section 3.1,
(ii) with respect to any contract with a Contracting Party as provided in
Section 3.3 as to which Shareholder approval is required by the 1940 Act,
(iii) with respect to any termination or reorganization of the Trust or any
Sub-Trust to the extent and as provided in Sections 7.1 and 7.2, (iv) with
respect to any amendment of this Declaration of Trust to the extent and as
provided in Section 7.3, (v) to the same extent as the stockholders of a
Massachusetts business corporation as to whether or not a court action,
proceeding or claim should or should not be brought or maintained derivatively
or as a class action on behalf of the Trust or any Sub-Trust thereof or the
Shareholders (provided, however, that a shareholder of a particular Sub-Trust
shall not be entitled to a derivative or class action on behalf of any other
Sub-Trust (or shareholder of any other Sub-Trust) of the Trust) and (vi) with
respect to such additional matters relating to the Trust as may be required by
the 1940 Act, this Declaration of Trust, the By-Laws or any registration of
the Trust with the Commission (or any successor agency) or any state, or as
the Trustees may consider necessary or desirable. There shall be no
cumulative voting in the election of Trustees. Shares may be voted in person
or by proxy. A proxy with respect to Shares held in the name of two or more
persons shall be valid if executed by any one of them unless at or prior to
exercise of the proxy the Trust receives a specific written notice to the
contrary from any one of them. A proxy purporting to be executed by or on
behalf of a Shareholder shall be deemed valid unless challenged at or prior to
its exercise and the burden of proving invalidity shall rest on the
challenger. Until Shares are issued, the Trustees may exercise all rights of
Shareholders and may take any action required by law, this Declaration of
Trust or the By-Laws to be taken by Shareholders.
Section 5.2 Meetings. Meetings of Shareholders may be called by the
Trustees from time to time for the purpose of taking action upon any matter
requiring the vote or authority of the Shareholders as herein provided or upon
any other matter deemed by the Trustees to be necessary or desirable. Written
notice of any meeting of Shareholders shall be given or caused to be given by
the Trustees by mailing such notice at least seven days before such meeting,
postage prepaid, stating the time, place and purpose of the meeting, to each
Shareholder at the Shareholder's address as it appears on the records of the
Trust. The Trustees shall promptly call and give notice of a meeting of
Shareholders for the purpose of voting upon removal of any Trustee of the
Trust when requested to do so in writing by Shareholders holding not less than
10% of the Shares then outstanding. If the Trustees fail to call or give
notice of any meeting of Shareholders for a period of 30 days after written
application by Shareholders holding at least l0% of the Shares then
outstanding requesting a meeting be called for any other purpose requiring
action by the Shareholders as provided herein or in the By-Laws, then
Shareholders holding at least 10% of the Shares then outstanding may call and
give notice of such meeting, and thereupon the meeting shall be held in the
manner provided for herein in case of call thereof by the Trustees
Section 5.3 Record Dates. For the purpose of determining the
Shareholders who are entitled to vote or act at any meeting or any adjournment
thereof, or who are entitled to participate in any dividend or distribution,
or for the purpose of any other action, the Trustees may from time to time
close the transfer books for such period, not exceeding 30 days (except at or
in connection with the termination of the Trust), as the Trustees may
determine; or without closing the transfer books the Trustees may fix a date
and time not more than 60 days prior to the date of any meeting of
Shareholders or other action as the date and time of record for the
determination of Shareholders entitled to vote at such meeting or any
adjournment thereof or to be treated as Shareholders of record for purposes of
such other action, and any shareholder who was a Shareholder at the date and
time so fixed shall be entitled to vote at such meeting or any adjournment
thereof or to be treated as a Shareholder of record for purposes of such other
action, even though he has since that date and time disposed of his Shares,
and no Shareholder becoming such after that date and time shall be so entitled
to vote at such meeting or any adjournment thereof or to be treated as a
Shareholder of record for purposes of such other action.
Section 5.4 Quorum and Required Vote. A majority of the Shares entitled
to vote shall be a quorum for the transaction of business at a Shareholders'
meeting, but any lesser number shall be sufficient for adjournments. Any
adjourned session or sessions may be held, within a reasonable time after the
date set for the original meeting without the necessity of further notice. A
majority of the Shares voted, at a meeting of which a quorum is present shall
decide any questions and a plurality shall elect a Trustee, except when a
different vote is required or permitted by any provision of the 1940 Act or
other applicable law or by this Declaration of Trust or the By-Laws.
Section 5.5 Action by Written Consent. Subject to the provisions of the
1940 Act and other applicable law, any action taken by Shareholders may be
taken without a meeting if a majority of Shareholders entitled to vote on the
matter (or such larger proportion thereof as shall be required by the 1940 Act
or by any express provision of this Declaration of Trust or the By-Laws)
consent to the action in writing and such written consents are filed with the
records of the meetings of Shareholders. Such consent shall be treated for
all purposes as a vote taken at a meeting o- Shareholders.
Section 5.6 Inspection of Records. The records of the Trust shall be
open to inspection by Shareholders to the same extent as is permitted
stockholders of a Massachusetts business corporation under the Massachusetts
Business Corporation Law.
Section 5.7 Additional Provisions. The By-Laws may include further
provisions for Shareholders' votes and meeting and related matters not
inconsistent with the provisions hereof.
Section 5.8 Shareholder Communications. Whenever ten or more
Shareholders of record who have been such for at least six months preceding
the date of application, and who hold in the aggregate either Shares having a
net asset value of at least $25,000 or least 1% of the outstanding Shares,
whichever is less, shall apply to the Trustees in writing, stating that they
wish to communicate with other Shareholders with a view to obtaining
signatures to a request for a Shareholder meeting and accompanied by a form of
communication and request which they wish to transmit, the Trustees shall
within five business days after receipt of such application either (i) afford
to such applicants access to a list of the names and addresses of all
Shareholders as recorded on the books of the Trust or (ii) inform such
applicants as to the approximate number of Shareholders of record, and the
approximate cost of mailing to them the proposed communication and form of
request.
If the Trustees elect to follow the course specified in item (ii) above,
the Trustees, upon the written request of such applications, accompanied by a
tender of the material to be mailed and of the reasonable expense of mailing,
shall, with reasonable promptness, mail such material to all Shareholders of
record at their addresses as recorded on the books unless within five business
days after such tender the Trustees shall mail to such applicants and file
with the Commission, together with a copy of the material to be mailed, a
written statement signed by at least a majority of the Trustees to the effect
that in their opinion either such material contains untrue statements of fact
or omits to state facts necessary to make the statements contained therein not
misleading, or would be in violation of applicable law, and specifying the
basis of such opinion. The Trustees shall thereafter comply with the
requirements of the 1940 Act.
ARTICLE VI
LIMITATION OF LIABILITY; INDEMNIFICATION
Section 6.1 Trustees, Shareholders, etc. Not Personally Liable; Notice.
All persons extending credit to, contracting with or having any claim against
the Trust shall look only to the assets of the Sub-Trust with which such
person dealt for payment under such credit, contract or claim; and neither the
Shareholders of any Sub-Trust nor the Trustees nor any of the Trust's
officers, employees or agents, whether past, present or future, nor any other
Sub-Trust shall be personally liable therefor. Every note, bond, contract,
instrument, certificate or undertaking and every other act or thing whatsoever
executed or done by or on behalf of the Trust, any Sub-Trust or the Trustees
or any of them in connection with the Trust shall be conclusively deemed to
have been executed or done only by or for the Trust (or the Sub-Trust) or the
Trustees and not personally. Nothing in this Declaration of Trust shall
protect any Trustee or officer against any liability to the Trust or the
Shareholders to which such Trustee or officer would otherwise be subject by
reason of willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of the office of Trustee or of
such officer.
Every note, bond, contract, instrument, certificate or undertaking made
or issued by the Trustees or by any officers or officer shall give notice that
this Declaration of Trust is on file with the Secretary of The Commonwealth of
Massachusetts and shall recite to the effect that the same was executed or
made by or on behalf of the Trust or by them as Trustees or Trustee or as
officers or officer and not individually and that the obligations of such
instrument are not binding upon any of them or the Shareholders individually
but are binding only upon the assets and property of the Trust, or the
particular Sub-Trust in question, as the case may be, but the omission thereof
shall not operate to bind any Trustees or Trustee or officers or officer or
Shareholders or Shareholder individually.
Section 6.2 Trustee's Good Faith Action; Expert Advice; No Bond or
Surety. The exercise by the Trustees of their powers and discretions
hereunder shall be binding upon everyone interested. A Trustee shall be
liable for his own willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of the office of
Trustee, and for nothing else, and shall not be liable for errors of judgment
or mistakes of fact or law. Subject to the foregoing, (a) the Trustees shall
not be responsible or liable in any event for any neglect or wrongdoing of any
officer, agent, employee, consultant, adviser, administrator, distributor or
principal underwriter, custodian or transfer, dividend disbursing, Shareholder
servicing or accounting agent of the Trust, nor shall any Trustee be
responsible for the act or omission of any other Trustee; (b) the Trustees may
take advice of counsel or other experts with respect to the meaning and
operation of this Declaration of Trust and their duties as Trustees, and shall
be under no liability for any act or omission in accordance with such advice
or for failing to follow such advice; and (c) in discharging their duties, the
Trustees, when acting in good faith, shall be entitled to rely upon the books
of account of the Trust and upon written reports made to the Trustees by any
officer appointed by them, any independent public accountant, and (with
respect to the subject matter of the contract involved) any officer, partner
or responsible employee of a Contracting Party appointed by the Trustees
pursuant to Section 3.3. The Trustees as such shall not be required to give
any bond or surety or any other security for the performance of their duties.
Section 6.3 Indemnification of Shareholders. In case any Shareholder
(or former Shareholder) of any Sub-Trust of the Trust shall be charged or held
to be personally liable for any obligation or liability of the Trust solely by
reason of being or having been a Shareholder and not because of such
Shareholder's acts or omissions or for some other reason, said Sub-Trust (upon
proper and timely request by the Shareholder) shall assume the defense against
such charge and satisfy any judgment thereon, and the Shareholder or former
Shareholder (or his heirs, executors, administrators or other legal
representatives or in the case of a corporation or other entity, its corporate
or other general successor) shall be entitled out of the assets of said Sub-
Trust estate to be held harmless from and indemnified against all loss and
expense arising from such liability.
Section 6.4 Indemnification of Trustees, Officers, etc. The Trust shall
indemnify (from the assets of the Sub-Trust or Sub-Trusts in question) each of
its Trustees and officers (including persons who serve at the Trust's request
as directors, officers or trustees of another organization in which the Trust
has any interest as a shareholder, creditor or otherwise [hereinafter referred
to as a "Covered Person"]) against all liabilities, including but not limited
to amounts paid in satisfaction of judgments, in compromise or as fines and
penalties, and expenses, including reasonable accountants' and counsel fees,
incurred by any Covered Person in connection with the defense or disposition
o- any action, suit or other proceeding, whether civil or criminal, before any
court or administrative or legislative body, in which such Covered Person may
be or may have been involved as a party or otherwise or with which such person
may be or may have been threatened, while in office or thereafter, by reason
of being or having been such a Trustee or officer, director or trustee, except
with respect to any matter as to which it has been determined that such
Covered Person (i) did not act in good faith in the reasonable belief that
such Covered Person's action was in or not opposed to the best interests of
the Trust or (ii) had acted with willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of such
Covered Person's office (either and both of the conduct described in (i) and
(ii) being referred to hereafter as "Disabling Conduct"). A determination
that the Covered Person is entitled to indemnification may be made by (i) a
final decision on the merits by a court or other body before whom the
proceeding was brought that the person to be indemnified was not liable by
reason of Disabling Conduct, (ii) dismissal of a court action or an
administrative proceeding against a Covered Person for insufficiency of
evidence of Disabling Conduct, or (iii) a reasonable determination, based upon
a review of the facts, that the indemnitee was not liable by reason of
Disabling Conduct by (a) a vote of a majority of a quorum of Trustees who are
neither "interested persons" of the Trust as defined in section 2(a)(19) of
the 1940 Act nor parties to the proceeding, or (b) an independent legal
counsel in a written opinion. Expenses, including accountants' and counsel
fees so incurred by any such Covered Person (but excluding amounts paid in
satisfaction of judgments, in compromise or as fines or penalties), may be
said from time to time by the Sub-Trust in question in advance or the final
disposition of any such action, suit or proceeding, provided that the Covered
Person shall have undertaken to repay the amounts so paid to the Sub-Trust in
question if it is ultimately determined that indemnification of such expenses
is not authorized under this Article VI and (i) the Covered Person shall have
provided security for such undertaking, (ii) the Trust shall be insured
against losses arising by reason of any lawful advances, or (iii) a majority
of a quorum of the disinterested Trustees who are not a party to the
proceeding, or an independent legal counsel in a written opinion, shall have
determined, based on a review of readily available facts (as opposed to a full
trial-type inquiry), that there is reason to believe that the Covered Person
ultimately will be found entitled to indemnification.
Section 6.5 Compromise Payment. As to any matter disposed of by a
compromise payment by any such Covered Person referred to in Section 6.4,
pursuant to a consent decree or otherwise, no such indemnification either for
said payment or for any other expenses shall be provided unless such
indemnification shall be approved (a) by a majority of the disinterested
Trustees who are not a party to the proceeding or (b) by an independent legal
counsel in a written opinion. Approval by the Trustees pursuant to clause (a)
or by independent legal counsel pursuant to clause (b) shall not prevent the
recovery from any Covered Person of any amount paid to such Covered Person in
accordance with any of such clauses as indemnification if such Covered Person
is subsequently adjudicated by a court of competent jurisdiction not to have
acted in good faith in the reasonable belief that such Covered Person's action
was in or not opposed to the best interests of the Trust or to have been
liable to the Trust or its Shareholders by reason of willful misfeasance, bad
faith, gross negligence or reckless disregard of the duties involved in the
conduct of such Covered Person's office.
Section 6.6 Indemnification Not Exclusive, etc. The right of
indemnification provided by this Article VI shall not be exclusive of or
affect any other rights to which any such Covered Person may be entitled. As
used in this Article VI, "Covered Person" shall include such person's heirs,
executors and administrators, an "interested Covered Person" is one against
whom the action, suit or other proceeding in question or another action, suit
or other proceeding on the same or similar grounds is then or has been pending
or threatened, and a "disinterested" person is a person against whom none of
such actions, suits or other proceedings or another action, suit or other
proceeding on the same or similar grounds is then or has been pending or
threatened. Nothing contained in this article shall affect any rights to
indemnification to which personnel of the Trust, other than Trustees and
officers, and other persons may be entitled by contract or otherwise under
law, nor the power of the Trust to purchase and maintain liability insurance
on behalf of any such person.
Section 6.7 Liability of Third Persons Dealing with Trustees. No person
dealing with the Trustees shall be bound to make any inquiry concerning the
validity of any transaction made or to be made by the Trustees or to see to
the application of any payments made or property transferred to the Trust or
upon its order.
ARTICLE VII
MISCELLANEOUS
Section 7.1 Duration and Termination of Trust. Unless terminated as
provided herein, the Trust shall continue without limitation of time and,
without limiting the generality of the foregoing, no change, alteration or
modification with respect to any Sub-Trust or class thereof shall operate to
terminate the Trust. The Trust may be terminated at any time by a majority of
the Trustees then in office subject to a favorable vote of a majority of the
outstanding voting securities, as defined in the 1940 Act, Shares of each Sub-
Trust voting separately by Sub-Trust.
Upon termination, after paying or otherwise providing for all charges,
taxes, expenses and liabilities, whether due or accrued or anticipated as may
be determined by the Trustees, the Trust shall in accordance with such
procedures as the Trustees consider appropriate reduce the remaining assets to
distributable form in cash, securities or other property, or any combination
thereof, and distribute the proceeds to the Shareholders, in conformity with
the provisions of subsection (d) of Section 4.2.
Section 7.2 Reorganization. The Trustees may sell, convey, merge and
transfer the assets of the Trust, or the assets belonging to any one or more
Sub-Trusts, to another trust, partnership, association or corporation
organized under the laws of any state of the United States, or to the Trust to
be held as assets belonging to another Sub-Trust, in exchange for cash, shares
or other securities (including, in the case of a transfer to another Sub-Trust
of the Trust, Shares of such other Sub-Trust or any class thereof) with such
transfer being made subject to, or with the assumption by the transferee of,
the liabilities belonging to each Sub-Trust the assets of which are so
transferred; provided, however, that no assets belonging to any particular
Sub-Trust shall be so transferred unless the terms of such transfer shall have
first been approved at a meeting called for the purpose by the affirmative
vote of the holders of a majority of the outstanding voting Shares, as defined
in the 1940 Act, of that Sub-Trust. Following such transfer, the Trustees
shall distribute such cash, shares or other securities (taking into account
the differences among the classes of Shares thereof, if any, and giving due
effect to the assets and liabilities belonging to and any other differences
among the various Sub-Trusts the assets belonging to which have so been
transferred) among the Shareholders of the Sub-Trust the assets belonging to
which have been so transferred; and if all of the assets or the Trust have
been so transferred, the Trust shall be terminated.
Section 7.3 Amendments. All rights granted to the Shareholders under
this Declaration of Trust are granted subject to the reservation of the right
to amend this Declaration of Trust as herein provided, except that no
amendment shall repeal the limitations on personal liability of any
Shareholder or Trustee or repeal the prohibition of assessment upon the
Shareholders without the express consent of each Shareholder or Trustee
involved. Subject to the foregoing, the provisions of this Declaration of
Trust (whether or not related to the rights of Shareholders) may be amended at
any time, so long as such amendment does not adversely affect the rights of
any Shareholder with respect to which such amendment is or purports to be
applicable and so long as such amendment is not in contravention of applicable
law, including the 1940 Act, by an instrument in writing signed by a majority
of the then Trustees (or by an officer of the Trust pursuant to the vote of a
majority of such Trustees). Any amendment to this Declaration of Trust that
adversely affects the rights of Shareholders may be adopted at any time by an
instrument in writing signed by a majority of the then Trustees (or by an
officer of the Trust pursuant to the vote of a majority of such Trustees) when
authorized to do so by the vote in accordance with subsection (e) of Section
4.2 of Shareholders holding a majority of the Shares entitled to vote.
Subject to the foregoing, any such amendment shall be effective as provided in
the instrument containing the terms of such amendment or, if there is no
provision therein with respect to effectiveness, upon the execution of such
instrument and of a certificate (which may be a part of such instrument)
executed by a Trustee or officer of the Trust to the effect that such
amendment has been duly adopted.
Section 7.4 Filing of Copies; References; Headings. The original or a
copy of this instrument and of each amendment hereto shall be kept at the
office of the Trust where it may be inspected by any Shareholder. A copy of
this instrument and of each amendment hereto shall be filed by the Trust with
the Secretary of The Commonwealth of Massachusetts and with the Boston City
Clerk, as well as any other governmental office where such filing may from
time to time be required, but the failure to make any such filing shall not
impair the effectiveness of this instrument or any such amendment. Anyone
dealing with the Trust may rely on a certificate by an officer of the Trust as
to whether or not any such amendments have been made, as to the identities of
the Trustees and officers, and as to any matters in connection with the Trust
hereunder; and, with the same effect as if it were the original, may rely on a
copy certified by an officer of the Trust to be a copy of this instrument or
of any such amendments. In this instrument and in any such amendment,
references to this instrument, and all expressions like "herein", "hereof" and
"hereunder" shall be deemed to refer to this instrument as a whole as the same
may be amended or affected by any such amendments. The masculine gender shall
include the feminine and neuter genders. Headings are placed herein for
convenience of reference only and shall not be taken as a part hereof or
control or affect the meaning, construction or effect of this instrument.
This instrument may be executed in any number of counterparts each of which
shall be deemed an original.
Section 7.5 Applicable Law. This Declaration of Trust is made in The
Commonwealth of Massachusetts, and it is created under and is to be governed
by and construed and administered according to the laws of said Commonwealth,
including the Massachusetts Business Corporation Law as the same may be
amended from time to time, to which reference is made with the intention that
matters not specifically covered herein or as to which an ambiguity may exist
shall be resolved as if the Trust were a business corporation organized in
Massachusetts, but the reference to said Business Corporation Law is not
intended to give the Trust, the Trustees, the Shareholders or any other person
any right, power, authority or responsibility available only to or in
connection with an entity organized in corporate form. The Trust shall be of
the type referred to in Section 1 of Chapter l82 of the Massachusetts General
Laws and of the type commonly called a Massachusetts business trust, and
without limiting the provisions hereof, the Trust may exercise all powers
which are ordinarily exercised by such a trust.
IN WITNESS WHEREOF, the undersigned have hereunto set their hands and
seals in the City of Boston, Commonwealth of Massachusetts for themselves and
their assigns, as of the day and year first above written.
/s/ Lee D. Augsburger
Lee D. Augsburger
/s/ Caren A. Cunningham
Caren A. Cunningham
- -4-
BY-LAWS
OF
SMITH BARNEY SHEARSON OREGON MUNICIPALS FUND
MARCH __, 1994
ARTICLE 1
Agreement and Declaration of Trust and Principal Office
1.1 Agreement and Declaration of Trust. These By-Laws shall be
subject to the Master Trust Agreement, as from time to time in effect
(the "Master Trust Agreement"), of Smith Barney Shearson Oregon
Municipals Fund, the Massachusetts business trust established by the
Master Trust Agreement (the "Trust").
1.2 Principal Office of the Trust. The principal office of the
Trust shall be located at Two World Trade Center, New York, New York
10048.
ARTICLE 2
Meetings of Trustees
2.1 Regular Meeting. Regular meetings of the Trustees may be
held without call or notice at such places and at such times as the
Trustees may from time to time determine, provided that notice of the
first regular meeting following any such determination shall be given to
absent Trustees.
2.2 Special Meetings. Special meetings of the Trustees may be
held at any time and at any place designated in the call of the meeting
when called by the Chairman of the Trustees, the President or the
Treasurer or by two or more Trustees, sufficient notice thereof being
given to each Trust by the Secretary or an Assistant Secretary or by the
officer of the Trustees calling the meeting.
2.3 Notice. It shall be sufficient notice to a Trustee of a
special meeting to send notice by mail at least forty-eight hours or by
telegram at least twenty-four hours before the meeting addressed to the
Trustee at his or her usual or last known business or residence address
or to give notice to him or her in person or by telephone at least
twenty-four hours before the meeting. Notice of a meeting need not be
given to any Trustee if a written waiver of notice, executed by him or
her before or after the meeting, is filed with the records of the
meeting, or to any Trustee who attends the meeting without protesting
prior thereto or at its commencement the lack of notice to him or her.
Neither notice of a meeting nor a waiver of a notice need specify the
purpose of the meeting.
2.4 Quorum. At any meeting of the Trustees a majority of the
Trustees then in office shall constitute a quorum. Any meeting may be
adjourned from time to time by a majority of the votes cast upon the
question, whether or not a quorum is present, and the meeting may be
held as adjourned without further notice.
2.5 Participation by Telephone. One or more of the Trustees or
of any committee of the Trustees may participate in a meeting thereof by
means of a conference telephone or similar communications equipment
allowing all persons participating in the meeting to hear each other at
the same time. Participation by such means shall constitute presence in
person at a meeting.
ARTICLE 3
Officers
3.1 Enumeration; Qualification. The officers of the Trust
shall be a Chairman of the Trustees, a President, a Treasurer, a
Secretary and such other officers, including Vice Presidents, if any, as
the Trustees from time to time may in their discretion elect. The Trust
may also have such agents as the Trustees from time to time in their
discretion may appoint. The Chairman of the Trustees shall be a Trustee
and may but need not be a shareholder; and any other officer may be but
none need be a Trustee or shareholder. Any two or more offices may be
held by the same person.
3.2 Election. The Chairman of the Trustees, the President, the
Treasurer and the Secretary shall be elected annually by the Trustees.
Other officers, if any, may be elected or appointed by the Trustees at
any time. Vacancies in any office may be filled at any time.
3.3 Tenure. The Chairman of the Trustees, the President, the
Treasurer and the Secretary shall hold office until their respective
successors are chosen and qualified, or in each case until he or she
sooner dies, resigns, is removed or becomes disqualified. Each other
officer shall hold office and each agent shall retain authority at the
pleasure of the Trustees.
3.4 Powers. Subject to the other provisions of these By-Laws,
each officer shall have, in addition to the duties and powers herein and
in the Master Trust Agreement set forth, such duties and powers as are
commonly incident to the office occupied by him or her as if the Trust
were organized as a Massachusetts business corporation and such other
duties and powers as the Trustees may from time to time designate.
3.5 Chairman; President. Unless the Trustees otherwise
provide, the Chairman of the Trustees, or, if there is none, or in the
absence of Chairman, the President shall preside at all meetings of the
shareholders and of the Trustees. The Chairman shall be the chief
executive officer.
3.6 Treasurer. The Treasurer shall be the chief financial and
accounting officer of the Trust, and shall, subject to the provisions of
the Master Trust Agreement and to any arrangement made by the Trustees
with a custodian, investment adviser or manager, or transfer,
shareholder servicing or similar agent, be in charge of the valuable
papers, books of account and accounting records of the Trust, and shall
have such other duties and powers as may be designated from time to time
by the Trustees or by the President.
3.7 Secretary. The Secretary shall record all proceedings of
the shareholders and the Trustees in books to be kept therefor, which
books or a copy thereof shall be kept at the principal office of the
Trust. In the absence of the Secretary from any meeting of the
shareholders or Trustees, an assistant secretary, or if there be none or
if he or she is absent, a temporary secretary chosen at such meeting
shall record the proceedings thereof in the aforesaid books.
3.8 Resignations and Removals. Any Trustee or officer may
resign at any time by written instrument signed by him or her and
delivered to the Chairman, the President or the Secretary or to a
meeting of the Trustees. Such resignation shall be effective upon
receipt unless specified to be effective at some other time. The
Trustees may remove any officer elected by them with or without cause.
Except to the extent expressly provided in a written agreement with the
Trust; no Trustee or officer resigning and no officer removed shall have
any right to any compensation for any period following his or her
resignation or removal.
ARTICLE 4
Committees
4.1 General. The Trustees, by vote of a majority of the
Trustees then in office, may elect from their number an Executive
Committee or other committees and may delegate thereof some or all of
their powers except those which by law, by the Master Trust Agreement,
or by these By-Laws may not be delegated. Except as the Trustees may
otherwise determine, any such committee may make rules for the conduct
or in such rules, its business shall be conducted so far as possible in
the same manner as is provided by these By-Laws for the Trustees
themselves. All members of such committees shall hold such office at
the pleasure of the Trustees. The Trustees may abolish any such
committee at any time. Any committee to which the Trustees delegate any
of their power or duties shall keep records of its meetings, and shall
report its action to the Trustees. The Trustees shall have power to
rescind any action of any committee, but no such rescission shall have
retroactive effect. The Pricing Committee should consist of at least
two Trustees, provided the Committee is at all times comprised of at
least 50% "non-interested" Trustees of the Fund. In the event the
Chairman of the Board of Trustees is not present at a meeting of the
Pricing Committee, the Committee should only convene if the President of
the Fund is present at such meeting, provided the President, unless also
a Trustee of the Fund, shall not have any voting rights.
ARTICLE 5
Reports
5.1 General. The Trustees and officers shall render reports at
the time and in the manner required by the Master Trust Agreement or any
applicable law. Officers and Committees shall render such additional
reports as they may deem desirable or as may from time to time be
required by the Trustees.
ARTICLE 6
Seal
6.1 General. The seal of the Trust shall consist of a flat-
faced die with the word "Massachusetts", together with the name of the
Trust and the year of its organization, cut or engraved thereon, but,
unless otherwise required by the Trustees, the seal shall not be
necessary to be placed on, and its absence shall not impair the validity
of, any document, instrument or other paper executed and delivered by or
on behalf of the Trust.
ARTICLE 7
Execution of Papers
7.1 General. Except as the Trustees may generally or in
particular cases authorize the execution thereof in some other manner,
all deeds, leases, contracts, notes and other obligations made by the
Trustees shall be signed by the President, any Vice President or the
Treasurer and need not bear the seal of the Trust.
ARTICLE 8
Issuance of Share Certificates
8.1 Share Certificates. In lieu of issuing certificates for
shares, the Trustees or the transfer agent may either issue receipts
therefor or may keep accounts upon the books of the Trust for the record
holders of such shares, who shall in either case be deemed, for all
purpose hereunder, to be the holders of certificates for such shares as
if they had accepted such certificates and shall be held to have
expressly assented and agreed to the terms hereof.
The Trustees may at any time authorize the issuance of share
certificates. In that event, each shareholder shall be entitled to a
certificate stating the number of shares owned by him or her, in such
form as shall be prescribed from time to time by the Trustees. Such
certificate shall be signed by the President or a Vice-President and by
the Treasurer or Assistant Treasurer. Such signatures may be facsimiles
if the certificate is signed by a transfer agent, or by a registrar,
other than a Trustee, officer or employee of the Trust. In case any
officer who has signed or whose facsimile signature has been placed on
such certificate shall cease to be such officer before such certificate
is issued, it may be issued by the Trust with the same effect as if he
were such officer at the time of its issue.
8.2 Loss of Certificates. In case of the alleged loss or
destruction or the mutilation of a share certificate, a duplicate
certificate may be issued in place thereof, upon such terms as the
Trustees shall prescribe.
8.3 Issuance of New Certificate to Pledgee. A pledgee of
shares transferred as collateral security shall be entitled to a new
certificate if the instrument of transfer substantially describes the
debt or duty that is intended to be secured thereby. Such new
certificate shall express on its face that it is held as collateral
security, and the name of the pledgor shall be stated thereon, who alone
shall be liable as a shareholder, and entitled to vote thereon.
8.4 Discontinuance of Issuance of Certificates. The Trustees
may at any time discontinue the issuance of share certificates and may,
by written notice to each shareholder, require the surrender of shares
certificates to the Trust for cancellation. Such surrender and
cancellation shall not affect the ownership of shares in the Trust.
ARTICLE 9
Custodian
9.1 General The Trust shall at all time employ a bank or
trust company having a capital, surplus and undivided profits of at
least Two Million Dollars ($2,000,000) as Custodian of the capital
assets of the Trust. The Custodian shall be compensated for its
services by the Trust and upon such basis as shall be agreed upon from
time to time between the Trust and the Custodian.
ARTICLE 10
Dealings with Trustees and Officers
Any Trustee, officer or other agent of the Trust may acquire, own
and dispose of shares of the Trust to the same extent as if he or she
were not a trustee, officer or agent; and the Trustees may accept
subscriptions to shares or repurchase shares from any firm or company in
which he or she is interested.
ARTICLE 11
Shareholders
11.1 Meetings. A meeting of the shareholders of the Trust shall
be held whenever called by the Trustees and whenever election of a
Trustee or Trustees by shareholders is required by the provisions of
section 16(a) of the Investment Company Act of 1940 for that purpose.
The Trustees shall promptly call and give notice of a meeting of
shareholders for the purpose of voting upon removal of any Trustees of
the Trust when requested to do so in writing by shareholders holding not
less then 10% of the shares then outstanding. Meetings of shareholders
for any other purpose shall also be called by the Trustees when
requested in writing by shareholders holding at least 10% of the shares
then outstanding, or if the Trustees shall fail to call or give notice
of any meeting of shareholders for a period of 30 days after such
application, then shareholders holding at least 10% of the shares then
outstanding may call and give notice of such meeting.
11.2 Record Dates. For the purpose of determining the
shareholders who are entitled to vote or act at a meeting or any
adjournment thereof, or who are entitled to receive payment of any
dividend or of any other distribution, the Trustees may from time to
time fix a time, which shall be not more than 60 days before the date of
any meeting of shareholders or the date for the payment of any dividend
or of any other distribution, as the record date for determining the
shareholders having the right to notice of and to vote at such meeting
an any adjournment thereof or the right to receive such dividend or
distribution, and in such case only shareholders of record on such
record date shall have such right, notwithstanding any transfer of
shares on the books of the Trust after the record date; or without
fixing such record date the Trustees may for any purposes close the
register or transfer books for all or any part of such period.
ARTICLE 12
Amendments to the By-Laws
12.1 General. These By-Laws may be amended or repealed, in
whole or in part, by a majority of the Trustees then in office at any
meeting of the Trustees, or by one or more writings signed by such a
majority.
ARTICLE 13
Declaration of Trust
The Master Trust Agreement establishing Smith Barney Shearson
Oregon Municipals Fund, dated ___________, a copy of which, together
with all amendments thereto, is on file in the office of the Secretary
of The Commonwealth of Massachusetts, provides that the name Smith
Barney Shearson Oregon Municipals Fund refers to the Trustees, under the
Master Trust Agreement collectively as Trustees, but not as individuals
or personally; and no Trustee, shareholder, officer, employee or agent
of Smith Barney Shearson Oregon Municipals Fund shall be held to any
personal liability, nor shall resort be had to their private property,
for the satisfaction of any obligation or claim or otherwise, in
connection with the future affairs of Smith Barney Shearson Oregon
Municipals Fund, but the Trust Estate only shall be liable.
g/shared/domestic/clients/shearson/funds/ore/bylaw
